The UAE is going ahead and adopting impressive strides in order to reinforce its position as an international hub of the Islamic finance sector with its Shariah-compliant banking sector, which at present accounts for 23% of the overall banking assets of the country, which is equivalent to Dh845 billion.
The governor of the Central Bank of the UAE, Khaled Mohamed Balama, remarked that the nation’s buoyant Islamic banking industry has gone on to become an integral part of the UAE’s financial landscape. The sector happens to play a critical role in the development as well as the provision of sustainable finance and also in meeting the sustainability aims of the broader financial sector, in sync with the UAE’s regulatory, supervisory, as well as risk management directives.
The central bank governor went on to further add that the Islamic finance sector happens to be the key to the UAE’s sustainable progress and its achievement in terms of sustainable development goals, in keeping with the vision of the nation’s leadership. They shall continue their efforts so as to support the progress of the Islamic and sustainable finance industries in the UAE in order to enhance their stature as well as their participation within the broader sector.  Balama was quoted as saying this within the UAE Islamic Finance Report 2023 that was issued by CBUAE.
Islamic windows, apart from the takaful market as well as sukuk issuances, comprise 25% of the overall Islamic banking assets within the UAE, which is equal to Dh214 billion. This happens to be further strengthened by the directives of the Guiding Principles Regarding Sustainability in Islamic Financial Institutions given by the Higher Shari’ah Authority, remarked the CBUAE governor.
It is well to be noted that the apex bank’s Islamic Finance Report, which underscores the sustainable Islamic finance endeavours of Islamic financial institutions- IFIs throughout the UAE, falls in line with the UAE’s Year of Sustainability as well as its recent hosting of COP28.
The report goes on to evaluate the performance of numerous Islamic finance sectors, initiatives, along with the activities internationally as well as locally, with a certain focus when it comes to sustainability. The report also goes on to offer an overview of the legislative, regulatory, and Shariah governance spectrums, apart from an assessment of the sustainability strategies embraced by Islamic financial institutions- IFIs and the opportunities and issues they go on to face.
Significantly, the UAE’s Islamic finance backdrop has 8 standalone Islamic banks, 16 Islamic banking windows in terms of conventional banks, and 9 Islamic finance organizations. The report also underscores the presence of 10 takaful insurance companies with total gross written contributions that amounted to Dh4 billion in 2022, and the value of sukuk outstanding was Dh217 billion in H1 of 2023.
Pushed due to favorable dynamics across the GCC and a certain other core market, the size of the international Islamic finance industry is all set to cross the $3 trillion mark in 2024, progressing by almost 10% after expanding at a much similar pace in 2022, as per the S&P Global Ratings. In 2022, GCC nations went on to drive most of the growth when it came to banking assets. Malaysia, along with the GCC countries, accounted for a major portion of the sukuk market throughout the same period.
As per the ICD-Refinitiv Islamic Finance Development Indicator report, the international Islamic finance sector is expected to rise to $6.0 trillion by 2026.
Importantly, Islamic banking activities comprised of around 70% of the overall worldwide Islamic finance assets in 2021, said the IFDI Report. The second-biggest vertical is Shariah-compliant debt capital market tools, which comprise 18%, and Islamic funds happen to be the third, having 4.0%.
Certain other Islamic financial institutions, which include financial technology- FinTech, investment, financing as well as leasing and microfinance companies and also brokers and traders, comprised of 4.0% of worldwide Islamic finance assets in 2021, whereas takaful, which is Islamic insurance, happened to have the smallest representation with around 2.0%.
