Credit By: Fast Company Middle East
The Islamic finance sector in the United Arab Emirates (UAE) has experienced significant expansion, with assets reaching Dh845 billion, constituting 23% of the country’s total banking assets. Khaled Mohamed Balama, the Governor of the Central Bank of the UAE, emphasized the integral role played by the Islamic banking sector in the nation’s financial industry. Islamic windows, the takaful market, and sukuk issuances contribute substantially, accounting for 25% of total Islamic banking assets, equivalent to Dh214 billion. The UAE, having hosted COP28 and aligning with the Year of Sustainability, has demonstrated a commitment to sustainable finance practices.
Diverse Landscape of Islamic Finance in the UAE
The Islamic finance landscape in the UAE is diverse, comprising eight standalone Islamic banks, 16 Islamic banking windows of conventional banks, and nine Islamic finance companies. Additionally, the presence of 10 takaful insurance companies has contributed to a total gross written contribution of Dh4 billion in 2022, while the value of sukuk outstanding stood at Dh217 billion in the first half of 2023. This diversity underscores the comprehensive nature of the Islamic finance sector in the UAE.
Global Islamic Finance Industry Set to Surpass $3 Trillion
Globally, the Islamic finance industry is poised to surpass $3 trillion in size in the current year, marking a growth rate of around 10%. According to the ICD-Refinitiv Islamic Finance Development Indicator report, the global Islamic finance industry is projected to rise further to $6.0 trillion by 2026. Islamic banking activities, accounting for approximately 70% of global Islamic finance assets in 2021, underscore the sector’s prominence.
Sustainability Focus in Islamic Finance
The UAE’s Islamic Finance Report for 2023 places a specific emphasis on sustainability efforts within the Islamic finance sector. The issuance of the Guiding Principles Regarding Sustainability in Islamic Financial Institutions by the Higher Shari’ah Authority strengthens the sector’s commitment to sustainable practices. This aligns with broader trends within the financial industry globally, emphasizing the integration of environmental, social, and governance (ESG) principles into Islamic finance practices.
Robust Growth and Future Prospects
The UAE’s focus on sustainable growth and its achievements in the Islamic finance sector reflect the vision of the country’s leadership. The commitment to developing the Islamic and sustainable finance sectors is evident in the UAE’s regulatory, supervisory, and risk management directives. With a diverse array of Islamic financial institutions and a commitment to sustainability, the UAE is poised to maintain its position as a global hub for Islamic finance.
Follow ARP Media for more informative blogs.