Muhammad Khan, a principal at Deloitte Bermuda, wrote exactly a year ago that no international finance centre has moved as fast and comprehensively to open doors and facilitate the Islamic finance revolution as Bermuda. He had said the island is “set to become the first offshore centre for Islamic finance in the west.”Now Bermuda has new competition from a hometown player — Dubai is jumping into the ring.Mr Khan said: “Bermuda’s Government has been actively engaged for a number of years in supporting the growth of Islamic finance and in establishing partnerships with the developing financial centres in Muslim countries. These initiatives include signing Double Taxation Agreements with Bahrain and Qatar, and Tax Information Exchange Agreements with over 37 countries including Indonesia, Malaysia, Singapore and Korea. As Indonesia is the world’s most populous Islamic state, Malaysia and Bahrain leading product innovators, and Qatar the world’s richest nation by GDP per head, by signing these agreements Bermuda has positioned itself to leverage the main Islamic markets.“In fact, Bermuda has already made significant progress with the GCC, aided by initiatives such as Business Bermuda’s visits to Qatar and the UAE, a series of events in Bahrain and Dubai promoting the Island as an Islamic finance hub, and Bermuda’s representation at the World Islamic Banking Conference, the world’s largest annual gathering of international Islamic finance industry leaders, which took place in Bahrain in December 2012.”And Bermuda is ‘Open for Islamic business:’ — the message Business Bermuda specifically took to the banking conference Asia Summit in Singapore in June 2012, according to The Royal Gazette.“After a whirlwind of meetings, events, conferences, and media interviews in Shanghai, Beijing, Singapore, and Hong Kong, Business Bermuda concluded the 2012 Asia Business Development Drive on a high note,” said Business Bermuda.With trillions of dollars at stake, it was worth the trip.Carrier Management reported last week that Dubai has unveiled plans to become a centre for business that follows Islamic principles, from banking and insurance to food processing, tourism and education.The Middle Eastern hub has already used its international ties to become the Gulf’s main centre for finance, trade and travel, and now Dubai officials have said they will focus on business related to the religious beliefs of the world’s 1.6 billion Muslims.Mohammed al-Gergawi, chairman of Dubai Holding, a conglomerate owned by the emirate’s ruler, was reported in the publication as telling a conference. “The total foreign trade of the Muslim world is $4 trillion. This shows the potential that is available for Dubai.”Dubai has ambitions to become a top centre for the issuance and trading of Islamic bonds, which are structured to avoid the payment of interest. “It aims to rival the main hubs for Islamic bonds, Kuala Lumpur and London, by creating a set of clear, commonly accepted standards,” stated Carrier Management.Sukuk, or Islamic bonds, are an important way to raise funds for projects and remain within the bounds of Islamic law.Susuk, according the Financial Times, represents undivided shares in the ownership of tangible assets relating to particular projects or special investment activity. A sukuk investor has a common share in the ownership of the assets linked to the investment, although this does not represent a debt owed to the issuer of the bond.“In the case of conventional bonds the issuer has a contractual obligation to pay to bond holders, on certain specified dates, interest and principal. In contrast, under a sukuk structure the sukuk holders each hold an undivided beneficial ownership in the underlying assets.“Consequently, sukuk holders are entitled to a share in the revenues generated by the Sukuk assets. The sale of sukuk relates to the sale of a proportionate share in the assets.“Since the beginning of 2000, sukuk have become important Islamic financial instruments in raising funds for long-term project financing.“The first sukuk were issued by Malaysia in 2000, followed by Bahrain in 2001. Since then sukuk have been used by both the corporate sector and states for raising alternative financing.”The Financial Times explained that various types of sukuk structures relate to the nature of the underlying asset. The most commonly used is where the sukuk relates to a partial ownership of an asset (sukuk al-ijarah). Other types of these bonds relate to partial ownership in a debt (sukuk murabaha), project (sukuk al-istisna), business (sukuk al-musharaka), or investment (sukuk al-istithmar).By 2011 more than $19 billion had been raised through 30 issues of sukuk bonds on the London Stock Exchange.And they quoted Abdulaziz al-Ghurair, chairman of the authority overseeing Dubai’s financial centre, who said the emirate would also focus on Islamic reinsurance. In conventional insurance, risk is transferred from one party to another; under Islamic rules, risk is shared among members of an insurance fund.“Because there are only 19 Islamic reinsurance firms globally, Islamic insurers are forced to transfer some of their risk to conventional reinsurers, creating a business opportunity for Dubai in establishing more firms, Ghurair said, and predicted the global Islamic reinsurance market would grow to $20 billion by 2020 from $11 billion at present.”Another area targeted by the Emirate is Islamic endowments, which the publication said are estimated to be worth hundreds of billions of dollars globally. “Analysts say many of them invest their money passively and inefficiently, creating potential for economic gains if they are reformed.”