UAE: Dubai’s debt crisis has unfairly put a damper on the Islamic finance industry, experts said, noting that an unstable credit environment and poor due diligence was to blame for the debacle.
The state-owned conglomerate Dubai World rocked global markets in November last year when it unveiled plans to delay repayment of US$26 billion in debt as it restructures.
The company staved off default on a US$4.1 billion Islamic bond linked to its property unit Nakheel after a last-minute bailout from Abu Dhabi.
“There have been some … stories to say that just because the transaction is Islamic, that’s why it went wrong,” said Simmons & Simmons partner Muneer Khan. His view is shared by another law firm Allen & Overy. The firm’s partner Anzal Mohammed said that some of the problems which are related to the Sukuk would have happened even if Nakheel had issued a conventional bond.