Top Islamic Financial Institutions 2024 Highlights

The top Islamic Financial Institutions landscape in 2024 is marked by resilience, growth, and continued adaptation. At the heart of this dynamic sector are the Middle East and Asia-Pacific regions, representing 96% of global Sharia-compliant assets together. While Middle Eastern banks demonstrate robust growth driven by high-performing institutions in Saudi Arabia and the UAE, Asia-Pacific markets face distinct challenges, from currency fluctuations to regulatory shifts.

Below, we delve into the performance of key regions, including the Middle East, Asia-Pacific, Europe, and emerging markets in Africa and Central Asia, analyzing top Islamic financial institutions and their impact on the global Islamic finance market.

Middle East Islamic Banks

The Middle East remains the primary hub of Islamic banking, with institutions in the region controlling 73% of global Sharia-compliant assets. The region’s dominance is underscored by top-performing banks in Saudi Arabia, the UAE, and Kuwait, which account for a significant portion of Islamic financial assets globally. Saudi Arabia, in particular, is home to some of the largest and most influential Islamic banks, including Al Rajhi Bank and Saudi National Bank (SNB).

In recent years, Saudi Arabia has established itself as the largest Islamic banking market worldwide, thanks to its strong economic base, government support, and growing demand for Sharia-compliant products. However, growth within the region has been uneven, reflecting both economic cycles and sector-specific factors. Al Rajhi Bank recognized as the largest Islamic bank globally, experienced a slowdown in asset growth in 2023, with a 6% increase compared to the previous year’s impressive 22%. This slowdown largely reflects a cooling in Saudi Arabia’s retail mortgage market, which had previously been a major driver of growth. Despite the slower asset growth, Al Rajhi Bank remains a key player, underpinned by its extensive retail banking network and innovative digital banking services.

On the other hand, Saudi National Bank (SNB), the second-largest Islamic bank in the kingdom, has gained ground on Al Rajhi by expanding its asset base and strengthening its market presence. SNB’s focus on corporate and investment banking, combined with strategic investments in technology, has positioned it well within the competitive landscape of Islamic finance.

A rising star in Saudi Arabia’s Islamic banking sector is Alinma Bank. In 2024, Alinma topped the performance rankings for growth and profitability, thanks to its strong lending portfolio and efficient asset management. Alinma’s Sharia-compliant assets grew by 18%, driven by a notable increase in financing activities and customer deposits. Its impressive financial performance has propelled it up the rankings, solidifying its position among Saudi Arabia’s leading Islamic banks.

In the United Arab Emirates, Dubai Islamic Bank (DIB) remains the largest Islamic bank by asset size, followed closely by Abu Dhabi Islamic Bank (ADIB). While DIB holds a dominant position in the UAE market, ADIB has emerged as a strong performer in 2024, climbing to the top of the country’s performance tables. ADIB’s growth in Sharia-compliant assets, which rose by 14.4%, was fueled by a 26% increase in investments, a 6% rise in gross financing, and a 14% uptick in customer deposits. ADIB’s strategic focus on digital transformation and customer experience has resonated well with clients, enhancing its competitive edge in the UAE’s crowded banking sector.

Asia-Pacific

Asia-Pacific is home to some of the most prominent Islamic banking markets outside the Middle East, with Malaysia and Indonesia leading the way. Malaysia, a long-established center for Islamic finance, holds approximately 65% of Sharia-compliant banking assets in the region. However, economic pressures, including currency fluctuations and increased competition, have tempered growth for Malaysian banks.

Maybank Islamic, Malaysia’s largest Islamic bank, witnessed a 5.1% decline in sharia-compliant assets in dollar terms, largely due to the depreciation of the Malaysian ringgit. However, on a local currency basis, Maybank Islamic saw positive growth in financing and advances, indicating resilience amidst challenging market conditions. The bank has maintained its position as a significant player in the global Islamic banking sector, though it slipped two positions in this year’s rankings.

CIMB Islamic, another major player in Malaysia, posted a 12.9% increase in financing and advances, making it the only one of Malaysia’s top five Islamic banks to record an asset increase in 2023. This growth is reflective of CIMB Islamic’s strategy to diversify its offerings, with a strong focus on SME financing and green financing initiatives that align with global sustainability goals.

Indonesia has emerged as a rising force in the Islamic finance industry, fueled by government initiatives and a growing consumer base. In 2023, Indonesia recorded a 14% increase in Sharia-compliant assets, driven largely by favorable economic policies and a strengthening of the Indonesian rupiah. The Indonesian government has actively encouraged the growth of Islamic finance, notably through the formation of Bank Syariah Indonesia (BSI) in 2021. BSI, formed from the merger of three state-owned Sharia banks, is Indonesia’s largest Islamic bank and has quickly become a symbol of the country’s commitment to expanding its Islamic finance sector. In 2023, BSI’s asset base grew by 18%, propelled by a 15.7% increase in disbursed funds.

Other Indonesian banks have also gained prominence, with Bank Aladin Syariah topping the performance tables for growth, operational efficiency, and return on risk. Bank NTB Syariah ranks second, thanks to high scores in profitability, soundness, and leverage. The success of these banks illustrates the strong demand for sharia-compliant products among Indonesia’s predominantly Muslim population.

Europe and Turkey

Europe’s Islamic finance market, though smaller than its Middle Eastern and Asia-Pacific counterparts, has shown steady growth, particularly in Turkey and the United Kingdom. Turkey, despite facing economic headwinds and currency depreciation, saw a 9% increase in Sharia-compliant assets in 2023. Leading Turkish banks, such as Kuveyt Turk Katilim Bankasi and TC Ziraat Bankasi, have continued to expand their Islamic finance portfolios, driven by a growing demand for ethical banking products.

The UK remains Europe’s second-largest Islamic finance market and has positioned itself as a gateway for Islamic finance in the Western world. British banks offering sharia-compliant services reported a 7.7% growth in assets, signaling rising interest among both Muslim and non-Muslim investors. The UK’s Islamic finance industry benefits from supportive regulatory frameworks, which have enabled the development of a wide range of Sharia-compliant products, from home financing to corporate loans.

Africa and Central Asia

Africa’s Islamic banking sector remains underdeveloped despite the continent’s large Muslim population. Growth has been constrained by economic instability in countries such as Nigeria and Egypt, where currency issues have created challenges for banks. However, there is growing interest in Islamic finance across the continent, as several African nations seek to attract foreign investment by promoting Sharia-compliant financial products.

In Central Asia, Kazakhstan has emerged as a promising market for Islamic finance. Al Hilal Islamic Bank, Kazakhstan’s largest Sharia-compliant bank, tripled its asset base in 2023, contributing to an impressive 90% growth in Sharia-compliant assets in the region. Although Central Asia’s Islamic finance market is still small compared to other regions, Kazakhstan’s performance suggests significant growth potential as the region’s Muslim population seeks financial services that align with Islamic principles.

Global Trends

The growth of Islamic finance is driven by several global trends, including an increasing demand for ethical and sustainable investment options, advancements in financial technology (fintech), and supportive regulatory frameworks. Fintech is particularly impactful in transforming Islamic banking by making it more accessible and user-friendly. Many top Islamic financial institutions are investing in digital platforms and mobile banking solutions to attract tech-savvy customers and meet the growing demand for convenient financial services.

Environmental, Social, and Governance (ESG) criteria have also become a focal point within Islamic finance. Islamic banks are integrating ESG principles into their product offerings, which aligns well with Sharia-compliant finance’s inherent focus on ethical investments. This alignment has attracted a broader audience of investors, including non-Muslims, who are interested in finance that adheres to ethical standards.

Challenges and Opportunities

Despite its growth, the Islamic finance industry faces several challenges. Economic volatility, particularly in emerging markets, affects the stability of Sharia-compliant assets. Additionally, Islamic banks must navigate complex regulatory environments, as Sharia-compliant products often require specialized oversight to ensure compliance with Islamic principles.

On the positive side, the demand for Islamic finance continues to expand as more consumers seek financial solutions that align with their values. Islamic banks have opportunities to tap into underserved markets, particularly in regions with large Muslim populations, such as Sub-Saharan Africa and parts of Southeast Asia. Moreover, innovations in fintech and the growth of Islamic social finance provide avenues for further expansion.

A Growing Influence in the Global Economy

The future of Islamic finance looks promising, with ongoing growth in its two primary markets, the Middle East and Asia-Pacific, and increasing interest in emerging markets worldwide. As Islamic banks continue to innovate and adapt to changing market conditions, they are well-positioned to play a larger role in the global financial system.

The top Islamic financial institutions of 2024 reflect the sector’s resilience, adaptability, and strong commitment to ethical banking principles. From Middle Eastern giants like Saudi National Bank to Asia-Pacific’s Bank Syariah Indonesia, these institutions are driving the growth of a sector that increasingly resonates with global investors. As Islamic finance gains traction in new regions and integrates with modern financial trends, it will likely continue to shape the future of ethical finance globally.