UAE Leads Rapid Growth in Islamic Finance and Sustainability

Post by: Elena Malik

The Islamic finance sector in the UAE is growing very fast. It is supported by a strong economy and clear rules that follow Sharia law. The UAE started its first Islamic bank in 1975, and since then, this sector has become an important part of the country’s economy. Islamic finance includes Islamic banks, special services for Islamic banking inside regular banks, and sukuk (Islamic bonds), which are now popular in the UAE and other countries.

The UAE government works hard to make Islamic finance better. It has created plans and rules to support this. These efforts are part of the government’s larger goal to grow the economy and make the UAE one of the world’s best places for Islamic finance.

The UAE has earned a top position in the Islamic economy worldwide. In 2022, it was one of the top three Islamic economies for the third year in a row. In 2023, it ranked fourth in the world for its Islamic financial market assets.

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According to a report from September 2024, Islamic banks in the UAE gave about 22% of all loans in the country. By the end of the third quarter of 2024, investments in Islamic banks were worth AED 152.3 billion. Experts say that Islamic banks will grow faster than regular banks in the coming years.

A study by the Central Bank of the UAE showed that 79% of Islamic banks in the UAE have plans for sustainability, which means focusing on projects that help the environment and the future. About 74% of these plans have been approved by their top leaders. All Islamic banks in the UAE have started work on these plans, but some regular banks with Islamic banking services are still making their plans.

The sukuk market in the UAE has grown a lot. Sukuk are Islamic bonds that follow Sharia law. The UAE government started sukuk in dirhams, the country’s currency, which brought in more investors. Green sukuk, which focus on environmentally friendly projects, have been available since 2019 and have also helped the sukuk market grow. The UAE is now ranked first in the region and second in the world for green sukuk.

By the third quarter of 2024, sukuk and bond sales in the UAE had grown by 13.1%. Together, they were worth $294.4 billion. About 20% of this amount came from sukuk. By the end of 2024, experts believe the UAE’s debt market will grow to more than $300 billion. This growth is happening because of government efforts to attract local and international investors.

The UAE holds 6.6% of the global sukuk market, which puts it in fourth place worldwide. It is also one of the largest sellers of US dollar debt in emerging markets. In the first half of 2024, the UAE had an 8.9% share of this market.

Experts think that Islamic finance in the UAE will keep growing because the UAE’s economy outside of oil is doing very well. During the COP28 climate conference, which was held in the UAE, speakers showed how Islamic finance can help with sustainability. This means Islamic finance can support projects that are good for the environment and help people in the future.

The UAE is also a leader in sukuk issuances. Nasdaq Dubai, the world’s largest market for sukuk, reported that the total value of sukuk listed in Dubai was $98.9 billion in December 2024.

The UAE’s focus on growing Islamic finance and supporting sustainability shows its commitment to building a strong and green economy. Islamic finance will continue to be a very important part of the UAE’s economy and will serve as an example for other countries.

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