Dubai International Financial Centre (DIFC) is poised to start the first phase of a major expansion project.

“The masterplan is ready. We might be launching its first phase soon,” said DIFC governor Essa Kazim during a press briefing in February.

Once fully complete, the expansion project – DIFC 2.0, launched in January 2019 – will add about 1.2 million square metres (sq m) of space to the site, including 590,000 sq m of offices, residences spanning 140,000 sq m and 120,000 sq m of retail outlets.

So far, DIFC has been focusing on the plots where it is developing an Innovation Centre, which will be ready by the end of the year, according to Kazim, and a mixed-use scheme called DIFC Living that he says is expected to be completed in 2025-26.

DIFC is considering various options to finance the expansion project.

“We can consider different ways of structuring it,” said Kazim. “If we really need to self-finance it, we are capable of doing it. Our balance sheet is extremely healthy.”

Building on growth

The announcement that the expansion could soon get under way came as DIFC reported strong growth in 2022.

DIFC’s combined revenues exceeded AED1bn for the first time last year, hitting AED1.06bn ($288m). This was 18 per cent up from the AED897m recorded in 2021.

Operating profits grew to AED679m from AED573m in 2021 and net profit rose 33 per cent year-on-year to AED517.9m in 2022, bringing the total assets held under DIFC to AED15.4bn.

DIFC reaffirmed its status as a global financial hub in 2022, registering a total of 1,084 new firms to bring the number of active registered companies to 4,377, up 20 per cent from 2021. 

DIFC also recorded its fastest-ever rate of employment growth. Employee numbers increased 22 per cent year-on-year, to 36,083.

Financial technology and innovation became the fastest-growing sector in DIFC, with 291 new clients registering in 2022

DIFC’s 2022 results reflect “the growing demand for a supportive ecosystem from global businesses looking to scale into emerging economies with high-growth financial services markets”, said Sheikh Maktoum bin Mohammed bin Rashid al-Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister and Finance Minister of the UAE and president of DIFC. 

“With financial technology becoming a vital growth catalyst across sectors, the UAE’s ambitious initiatives to drive the future of finance will create immense opportunities and new economic growth not only in our region but also across the globe,” he added.

Dubai’s recovery from the slowdown caused by the Covid-19 pandemic, led by key government initiatives, has supported the growth of DIFC, Kazim said.

“The region’s economy was decoupled from the rest of the world for the first time in a while,” he said. “In terms of our performance, it has gone in one direction, while the global economy has gone to another direction.” 

He added: “Between 2018 and 2022, the number of companies [registered at DIFC] nearly doubled. That means an average growth of 24 per cent every year.” 

Innovation drive

Financial technology (fintech) and innovation became the fastest-growing sector in DIFC, with 291 new clients registering in 2022. 

A total of 686 fintech and innovation-related firms, ranging from startups to global unicorns, are now based in DIFC and last year attracted more than $615m in funding.

As the leading international financial hub in the Middle East, Africa and South Asia (Measa) region, 64 per cent of the financial firms registered at DIFC come from within the region, while 18 per cent originate from Europe, 6 per cent from the UK, 6 per cent from the US and 6 per cent from other countries. 

“This reflects the strategy that we launched in 2014, where we indicated that 50 per cent of our companies needed to be originating from the region,” said Kazim. “Europe and the US are still relevant to us, but the main growth came from the Middle East.”

The number of Dubai Financial Services Authority-regulated financial entities at DIFC grew to 590, with 89 regulated financial service firms authorised in 2022, up from 51 in 2021.

Among the firms joining DIFC last year were Abu Dhabi Islamic Bank, Swiss bank BIC-BRED, Dubai-based insurance broker Continental Group International, fintech unicorn Darwinbox, US private investment management company Lord Abbett, Sculptor Capital Management Hong Kong, United Bank of Africa Group and global fintech company Volante.

Hedge funds influx

DIFC is home to 17 of the world’s top 20 banks, 25 of the world’s top 30 systemically important global banks, five of the top 10 insurance firms and five of the top 10 asset managers, and has become a centre for asset management firms. 

DIFC also has about 60 hedge funds waiting to be licensed, according to Kazim. “A few have already been licensed,” he added.

The hedge fund industry is capitalising on improved regulations, developed to support the sector, and is one of the sources of DIFC’s growth.

Total banking assets booked in DIFC were stable at $199bn in 2022. An additional $166bn of lending was also arranged by DIFC firms, up 54 per cent on 2021.

DIFC portfolio managers invested $164bn in 2022 compared with $151bn in 2021. Venture capital raised increased 78 per cent to $1.2bn. Gross written premiums for the insurance sector reached $2.1bn, rising from $1.8bn in 2021.