Ireland has launched a bid to become the home of Islamic finance in Europe as it seeks to rebuild its once dominant financial services sector.

The taoiseach, Enda Kenny, who was swept to power on a wave of public anger at the taxpayers' €70bn (£62bn) bailout of failed banks, told the Irish Funds Industry Association (IFIA) that he was doing everything he could to "ensure" Dublin became "a centre of excellence for Islamic finances".

Irish tax laws and financial regulations are now sharia-compliant, he said, and the government had recently signed double-taxation agreements with Saudi Arabia, Bahrain, Kuwait and the United Arab Emirates.

"There is first-mover advantage. If they [Islamic institutions] feel comfortable in a particular jurisdiction and you develop a cluster, more will follow," said Ken Owens, chairman of the IFIA. He said there was currently "a scramble" for Islamic business internationally and Ireland is just behind the UK in terms of adjusting its laws to be sharia-compliant.

Sharia law prohibits the payment of interest on loans or overdrafts, or the receipt of interest, and also prevents investment in certain categories including defence, adult entertainment and gambling.

"Their investment universe is quite limited. Islamic funds want to own the ship or the building, not a share in it. They want to own things outright because they can't pay interest. They want commmodities, infrastructure, manufacturing, property," said Owens.

On the mortgage market, institutions buy the house or the commercial real estate; the buyer then pays rent instead of interest.

Owens said Irish and UK financial institutions, which were devastated by the financial crisis, saw opportunities worth billions in Islamic finance, either seeking to get a toehold in Islamic countries or attract Islamic institutions to Dublin.

"The US and European asset management firms are already out in the Middle East and Asia with their products but now you've got those guys in China going 'I know China better than any US or European investor' and coming to Europe to compete with us," he said.

Owens, who is a partner in Pricewaterhouse Coopers Ireland, has one Middle-Eastern client who is about to open nine funds in Ireland; and the Irish Central Bank has recently authorised several Islamic institutions to operate in the Dublin's International Financial Services Centre.

The value of funds administered in Dublin is worth €1,890bn, split evenly between Irish and non-domiciled funds.