A visitor exits the headquarters of Dubai Islamic Bank in Dubai. The emirate is working on a Shariah board to develop regulations and a centre for corporate governance as it seeks to become the capital of the world’s Islamic economy by the end of 2016.

Bloomberg/Dubai

Dubai’s plan to start the first Shariah-compliant export-import bank is set to be an early test of its ambition to be the capital of the global Islamic economy.

The unrated emirate, which rolled over $20bn of debt last week, would need to ensure the bank is capitalised and has a credit rating, according to Rizwan H Kanji, Dubai-based partner at King & Spalding.

Dubai on March 19 said it appointed Noor Investment Group to study the feasibility of the lender.

“This project goes to the heart of Dubai’s Islamic drive,” Kanji said by phone from Dubai March 20. “There’s a gap in the market” for more trade financing options, he said, and the rating would be needed to bolster the credit-worthiness of borrowers.

Dubai is working on a Shariah board to develop regulations and a centre for corporate governance as it seeks to become the capital of the world’s Islamic economy by the end of 2016. Shariah-compliant banking assets worldwide probably exceeded $1.7tn in 2013, according to Ernst & Young. The emirate seeks to tap a growing demand for financing from Muslim countries that led the Islamic Development Bank to boost its sukuk programme by more than 50% to $10bn last year.

Dubai’s sukuk, Islamic bonds which comply with the ban on interest, have rallied this year as the emirate benefits from a resurgence in trade and tourism that boosted economic growth to 4.9% in 2013. The yield on its $750mn notes due January 2023 tumbled 45 basis points to 4.28% March 21, compared with a 23 basis-point drop to 4.41% for Middle East sukuk on average, according to JPMorgan Chase & Co indexes.

Currently “there are a couple of conventional Exim banks that provide guarantees and options that comply with Shariah,” Kanji said.

Export-Import Bank Malaysia last month issued the first dollar-denominated sukuk from an Exim bank, according to a statement on the Malaysian National News Agency. The lender - which offers Islamic cross border financing, trade financing and guarantees, according to its website - sold $300mn of five-year notes with a yield of 2.874%.

IDB provides similar support to an Exim bank for its member countries, according to Kanji. The development bank in February approved more than $700mn for projects in nations including Egypt, Azerbaijan, and Burkina Faso.

Dubai’s bank “will complement what IDB does,” Afaq Khan, chief executive officer of Standard Chartered Saadiq, said by phone on Sunday. It could be one of many Exim banks to come in the next decade because there is so much room to grow in the industry, he said.

For Dubai “The opportunity is there to be first and best and this will change the underlying economy of the country,” he said.

Dubai, one of seven emirates that make up the UAE, last year set a three-year timetable for its Islamic ambitions. The emirate struck a deal March 16 to roll over $10bn in loans owed to neighbouring Abu Dhabi and the same amount in bonds due to the UAE central bank. It plans to spend $8bn on infrastructure as it prepares to host the World Expo in 2020.

“An Exim bank could play a key role in infrastructure improvement, as well as credit enhancement for other jurisdictions,” said Kanji. “Many Islamic states need financing and want it in a Shariah-compliant manner, but don’t have the credit worthiness.”