UAE Islamic Banks’ Assets Exceed $195 Billion

UAE Becoming A Growing Islamic Finance Hub

The UAE’s Islamic banking sector continues to bolster its position as a key player in the global Islamic finance landscape. The sustained growth of UAE Islamic banks has positioned the country as the fourth-largest Islamic financial market worldwide in terms of assets, as highlighted in the Islamic Finance Development Indicator report.

Surging Deposits and Investments

The growth in assets is complemented by a substantial increase in deposits and investments. Deposits in UAE Islamic banks rose to AED 509.4 billion by the end of February 2024, reflecting an annual increase of 15.8% compared to AED 439.9 billion in February 2023. This represents a notable increase of AED 69.5 billion over the year. Additionally, total investments of Islamic banks reached AED 141.7 billion at the end of February 2024.

Comparative Performance with Conventional Banks

While UAE-based conventional banks also saw growth, with their total assets increasing by 11.7% to AED 3.48 trillion from AED 3.116 trillion in February 2023, Islamic banks continue to expand their market share. Conventional banks held approximately 82.9% of the total banking assets in the country at the end of February, amounting to AED 4.198 trillion, compared to Islamic banks’ share of 17.1%.

Focus on Shari’ah Compliance and Innovation

The UAE has placed a greater emphasis on harmonizing and calibrating Shari’ah requirements to promote the stability and growth of Islamic finance. This includes creating an enabling environment for the development of innovative products and services that adhere to Islamic principles. The aim is to ensure the sector’s resilience and attractiveness to both local and international investors.

Global and Regional Growth Projections

Globally, the Islamic finance industry is on a growth trajectory, with the UAE’s sector growing rapidly thanks to the robust performance of the non-oil economy. According to S&P Global Ratings, the UAE’s growth in Islamic finance outpaced other Islamic finance countries, which contributed only 15% to the industry’s incremental growth in 2023. S&P projects high-single-digit growth for the UAE’s Islamic finance sector in 2024-2025, following an 8.0% growth in 2023 (excluding Iran).

Sukuk Issuances on the Rise

Sukuk issuances are expected to play a significant role in driving the industry’s asset growth. S&P forecasts that sukuk issuances will range between $160 billion and $170 billion in 2024. The Sukuk market started strong in 2024, with total issuances reaching $46.8 billion by March 31, 2024, compared to $38.2 billion in the same period the previous year.

The UAE Islamic banks’ impressive asset growth, surpassing $195 billion, underscores the sector’s robust health and significant potential. With a strategic focus on Shari’ah compliance, innovation, and global market expansion, the UAE is poised to strengthen its position as a leading hub for Islamic finance. As the industry continues to grow, both locally and globally, UAE Islamic banks are well-positioned to capitalize on emerging opportunities and drive sustainable growth.

By leveraging its strategic initiatives and fostering an environment conducive to Islamic finance, the UAE is not only meeting the needs of its growing Muslim population but also attracting a diverse range of investors seeking ethical and Shari’ah-compliant financial solutions.