"Sri Lanka already has more than a decade of experience in Islamic finance. Sri Lanka has just approved an Islamic bank. That means regulators are open-minded."
Sri Lanka's central bank has just given provisional approval to set up Amana Bank which is promoted by Amana Investments, a group which has been in Islamic finance for more than a decade.
Several Sri Lankan banks also have 'Islamic banking' windows.
"You could be a bridge to Maldives, Mauritius and South India," Siddiqui said on the sidelines of an Islamic finance conference organized by UTO Educonsult, a consultancy.
Siddiqui says Sri Lanka could issue a 'Sukuk' or sovereign bond compliant with Shariah or Muslim religious law which could raise the profile of the island among Gulf countries.
"You could do a parallel rupee and dollar denominated issue," says Siddiqui. "Britain is talking about it. Singapore has issued Sukuks.
Saxony-Anhalt, a regional government issued a Sukuk, backed by government buildings.Middle Eastern nations and Malaysia have issued Islamic bonds for years. Global Islamic finance is valued at more than a trillion dollars.
Islamic financial instruments are structured on a profit sharing model so that it stands out from the interest yielding structure of conventional finance and is attractive to investors who want to be compliant with Shariah laws.
But Siddiqui says Islamic financial instruments are also issued and bought by non-Muslims. Feizal Salieh, head of Amana Investments says some of the firm's largest customers are companies with no religious affiliation.
Siddiqui says the issue of a sovereign Sukuk could also provide a benchmark for private firms to sell such securities. Sri Lanka is expected to allow private firms to issue securities to foreign firms before the end of the year.
Officials say there is a lot of liquidity in Gulf countries in particular that is looking for investment opportunities.