Dubai’s Islamic finance sector is well-positioned to seize a better opportunity with the size of the global Islamic asset management poised to grow from $60 billion to $185 billion, a report released by European Islamic Investment Bank said.

The report by the London-listed asset management and financing group EIIB-Rasmala said Dubai can become the global hub for Islamic asset management if it is able to drive greater innovation and diversification in the sector.

The report, entitled “Dubai: Global Hub for Islamic Finance”, highlights how despite its huge international potential and appeal, the Islamic asset management sector remains greatly underdeveloped.

“The industry has failed to take root among its core demographic. Its total assets under management represent a tiny fraction of global funds and its investor product offering is narrow and parochial, lacking choice, diversification and quality. Investors in the GCC increasingly demand more sophisticated Shariah-compliant savings, pensions, insurance and mutual fund products. They wish to diversify into a range of alternative and fixed income products – such as sukuk, leasing, trade finance, securitisation and other asset-backed instruments – as well diversify geographically,” said the report.

The study argued that the Islamic pension fund industry has a long way to catch up globally. There is now a critical need for the creation of a GCC-wide pension fund framework. Globally, pension funds have assets in excess of $27 trillion with Islamic pension funds making up just 0.001 per cent of this figure, despite Muslims representing almost a quarter of the world’s. Details