The fund will provide loans on a commercial basis to government and government-related entities "deemed to be of strategic and development importance to the Emirate of Dubai," it said in a statement.

However, the new head of Dubai's finance department clarified that the second tranche of a $20 billion bond programme will be open to all banks and financial instutions at home and abroad.

"It's open to banks, financial institutions inside and outside the country," Abdulrahman Al Saleh told Reuters.

Dubai, which has been hit hard by the global crisis, launched the $20 billion sovereign bond program last February to help state-linked firms. The first $10 billion tranche was sold to the UAE central bank.

On Wednesday, Dubai's finance department said the support fund will contribute to "the overall economic development of the emirate." The fund can invest in, hold and manage debt instruments on behalf of the Dubai government, collect loan repayments and reinvest some of the revenues.

The fund will not disclose the names of entities that receive support.

"The market will be looking for as much transparency as possible," said HSBC economist Simon Williams. "If they can't tell us who the funds have flowed to, I hope we will know how much has been disbursed and how much is in reserve."

The fund will be able to issue financial instruments such as bonds and sukuks and invest in commercial projects in and outside Dubai. It can also acquire partial or whole stakes in institutions and companies.

The support fund will be accountable to Dubai's Supreme Fiscal Committee, a government body established in 2007 to oversee the emirate's fiscal policies, according to the statement.