The government announced last month that it wanted to become a global centre for Islamic finance and other businesses based on Islamic principles. But it will face tough competition from established centres such as London and Malaysia, where trading of sukuk (Islamic bonds) is much more active.
Eissa Kazim, secretary-general of the committee leading Dubai's Islamic economy initiative, said: "We will harmonise all standards, structures and regulations through having a unified sharia board at a government level to oversee the industry."
Sharia boards are groups of scholars which rule on whether financial instruments and activities are religiously permissible. Most major Islamic banks and finance firms around the world have them; the rulings of different boards are sometimes inconsistent and the scholars are sometimes open to suggestions of conflicts of interest.
A government-level sharia board could reduce such confusion over standards in Dubai's Islamic finance industry, helping it attract business. With the prominent exception of Malaysia, few countries have a central board and other Gulf countries have followed a loose, decentralised model of regulation.
Having products in Dubai approved by a single entity could help to harmonise their structures, make it easier to create and list them on the bourse, and boost their appeal to investors.
"Unifying the sharia board will limit discrepancies between different structures and will boost confidence in our local market," said Hussain Al Qemzi, chief executive of Noor Islamic Bank.
New issues of sukuk jumped to about $121 billion worldwide in 2012, according to Thomson Reuters data, from around $85 billion in 2011. Dubai's share of this was relatively small and most of the emirate's issuers have listed their bonds and sukuk overseas, taking secondary market liquidity with them.
Almost $9.2 billion worth of sukuk is listed on the Dubai market, but $7.5 billion of sukuk issued from Dubai is listed internationally and around $1.5 billion is unlisted, said Kazim, who is also Dubai Financial Market's chief executive.
If 50 percent of total bond issuance from Dubai is Islamic and listed on the local bourse, "Dubai can easily top the list of Islamic financial centres," said Kazim.
Most debt issuers in Dubai are government-related entities which will definitely consider listing their sukuk locally, he added.
Last month Dubai Financial Market, which runs the emirate's securities market, published draft standards for sukuk with a consultation period that closes this Thursday.