The UAE, Particularly Dubai, is Becoming a Global Financial Hub

The UAE, Particularly Dubai, is Becoming a Global Financial Hub

04.01.2024 (updated 04.01.2024)

  • AX Blog
  • Dubai - global financial hub | AX CAPITAL

In any economy, finance is like oxygen. This is especially true for economies that are growing quickly. One example of such an economy is the UAE. The UAE saw around 3.5 percent GDP growth between 2010 and 2023. The country overcame the challenging years of the COVID-19 epidemic, posting a remarkable 7.4 percent growth in 2022 with a nominal GDP of US$507 bln. By the end of 2022, the combined assets of the top 10 UAE domestic banks had surpassed the country's GDP, amounting to US$898.89 bln.

As a result, Dubai, the financial centre of the seven United Arab Emirates, is vying for the title of the most modern financial hub alongside cities like New York, London, Singapore, and Hong Kong. Sheikh Mohammed bin Rashid al-Maktoum, the Vice President and Prime Minister of the United Arab Emirates and the Ruler of Dubai, unveiled a plan in early January 2023 with the objective of making Dubai one of the top four global financial centres in the world by 2033. 

The stability and predictability of interest rates are one benefit of the financial markets of the United Arab Emirates. The financial infrastructure of the country is more intricate than that of other nations in the area. One important piece of this infrastructure is the Dubai International Financial Centre (DIFC), a financial “free zone” that was created in 2004 and that is home to 4,200 businesses and over 550 regulated financial institutions that were attracted to the zone by the region’s independent courts, favourable tax laws, and assurances of contract security. 

Both businesses and individuals want secure investments, and the UAE has three stock exchanges that provide that security: Nasdaq Dubai, the Abu Dhabi Securities Exchange, and the Dubai Financial Market. For wealthy investors, the UAE has sixty hedge funds that manage private wealth in Dubai, with assets worth more than $1 trillion.

As a natural commodity exporter, the UAE has a well-developed commodity exchange system that facilitates commodity trading. For example, the Dubai Mercantile Exchange (DME), which opened in 2007, is a commodity market. For example, the DME trades in four major sectors: precious metals, including gold and diamonds; energy resources; and steel, metals, and agricultural products. 

The UAE banking system is well-capitalized and has a high level of liquidity. According to the UAE Central Bank, at the end of the first quarter of 2023, the number of locally incorporated banks (excluding investment banks) would have remained steady at 22. In 2021, First Abu Dhabi Bank (FAB) ranked #1 among commercial banks in the UAE in terms of total assets, with assets exceeding $272 bln. Meanwhile, the Emirates National Bank of Dubai (ENBD) had total assets of slightly more than $187 bln. Dubai is the absolute financial industry leader, with eight banks headquartered there, seven in Abu Dhabi, four in Sharjah, and one in each of the other emirates. Of the 28 foreign banks operating in the UAE, 20 are in Dubai and the rest in Abu Dhabi. Dubai accounted for 40% of the country’s 892 bank branches. 

According to UAE Central Bank statistics, at the end of the first quarter of 2023, total assets of domestic banks climbed by 2.6 percent on a quarter-over-quarter basis, reaching AED 3.7647 trillion. 

According to a recent Standard & Poor’s prognosis, UAE banks’ profitability will continue to improve, reaching pre-pandemic levels by 2023 because banks have been forming alliances and acquiring finance technology, all of which paves the way for financial innovation. This will reduce costs while also improving enterprise security. To safeguard consumers and assure safety from cybercrime, the UAE enacted anti-money laundering and counter-terrorism legislation and continues to analyse these threats in the finance industry.

Subsidiary services, such as investment businesses, law firms, audit companies, financial market and research specialists, and other similar services, emerge around the core financial services as they expand. Dubai, the UAE's premier financial centre, has already shown itself to be a worldwide hub in this regard and the emergence of these subsidiaries is certainly expected. Continuing the UAE’s dynamic growth is the current challenge; if it does continue, then the UAE will undoubtedly develop into a major global financial hub.

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