The UAE Islamic Finance Industry Hits The Ground Running In 2016

Rima Mrad Partner rima.mrad@bsabh.com

The UAE is moving ahead with its planswith respect to the development of theIslamic economy. 2016 started with theannouncement of a number of Islamiccompliant transactions that furtherfoster Dubai’s objective to become aglobal Islamic capital.

Islamic products are getting morepopular and in a recent study byBloomberg, it has been noted that UAEresidents are inclined to choose Islamicfinance loans over conventional ones.This is a major outcome confirming thegrowth of awareness regarding Islamicproducts among consumers.

Islamic banks are working on enhancingtheir contribution to the growth of SMEsand in the second week of January,Noor Bank initiated a detailed marketstudy for this sector. This step hasbeen complemented by the continueddevelopment of products to service thetrade and working capital needs of SMEs.In addition, Noor Bank has developedShariah compliant risk mitigationstructures that are not commonly used inthe Islamic banking space.

In this context, Noor Trade, a division ofNoor Bank providing Shariah compliantproducts and services to SMEs, hassigned an agreement with the MohamedBin Rashid Fund (MBRF), an initiative ofDubai SME, to support SMEs owned byUAE nationals. Under this agreement,the Islamic bank will be extendingfinancial support to the UAE nationalsfor existing ventures that have beenoperating for more than one year, byoffering financing of up to 80% of theproject cost, up to a maximum of AED5million (US$1.36 million).

Emirates Islamic, a Shariah compliantbank based in Dubai, expects an 11% loangrowth in 2016. The bank, which is alsothe Islamic financing arm of EmiratesNBD, stated that it is considering anincrease in trade finance, retail lendingand loans to SMEs, a segment thatshowed the most strain in 2015.

On another level, the Dubai Departmentof Economic Development hascommissioned a project to assess thefeasibility and subsequent establishmentof the world’s first Islamic export-importbank to boost the emirate’s foreigntrade. This proposed bank will provide amultiple range of products and servicesaimed at supporting trade flows into andout of the UAE. The view is also to assistbusinesses in the UAE to grow theirtrade flows by providing risk mitigation,financing and market access.

Gulf Marine Services has also recentlysecured a US$620 million syndicateddebt facility combining Islamic andconventional financing. The six-yearterm facility will replace its existingfunding facilities with no charges tothe previous borrowing covenants andcomprises a US$375 million term loan, aUS$175 million committed capex facilityand US$70 million for general workingcapital purposes.

A challenging year is expected for theIslamic finance sector in the UAE as aresult of the plunging oil prices and otherchallenges that the region is facing. Thisshould not, however, affect any of theongoing projects and commitments thatthe government announced earlier inrespect of the Islamic economy. We arealso looking to see more Islamic financestructured loans and deals in support ofthe number of construction projects to beannounced in 2016 in the UAE.

Published:	January 2016
Publication:	Islamic Finance News
Title:	The UAE Islamic finance industry hits the ground running in 2016
Practice:	Corporate and M&A,Banking & Finance
Authors:	*Rima Mrad*

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The UAE Islamic Finance Industry Hits The Ground Running In 2016

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