The United Arab Emirates (UAE) has secured its position as a major player in the global Islamic finance market, ranking fourth in terms of assets, according to the Islamic Finance Development Indicator report 2023 (IFDI 2023).
Released by the Central Bank of the UAE (CBUAE), the UAE Islamic Finance Report 2023 revealed a significant 11 percent growth in the Islamic finance sector in 2022. This surge has propelled the value of global Islamic financial assets to an impressive AED16.5 trillion (US$4.5 trillion). Over the past five years, the sector has experienced a remarkable 69 percent increase, with a staggering 163 percent surge over the last decade.
Since the inception of the first Islamic bank in 1975, Islamic finance has steadily evolved in the UAE, encompassing various sectors such as Islamic banking, takaful insurance, and sukuk. A robust regulatory framework, adept at balancing regulatory and legal requirements with Islamic law provisions, has contributed to the integration of Islamic finance into the UAE’s financial landscape.
Currently, assets held by Islamic banks and windows in conventional banks constitute 23 percent of total banking assets in the UAE. This figure reflects a commendable 16 percent growth over the past five years. Furthermore, the sukuk market in the UAE is witnessing expansion, spurred by recent issuances of Islamic treasury sukuk by the federal government in UAE dirham, potentially catalyzing further sukuk issuances by other entities.
Moreover, in recent years, there has been a heightened focus on harmonizing Shariah requirements to promote stability and growth in Islamic finance. Federal Law Decree No. (50) of 2022, which addresses the issuance of the Commercial Transactions Law, underscores the UAE’s commitment to enhancing legal certainty in Islamic finance transactions, fostering trust among stakeholders.
The Islamic finance sector in the UAE has also increasingly embraced sustainability initiatives aligned with the Sustainable Development Goals (SDGs). Notably, the issuance of environmental, social, and governance (ESG)-related sukuk has witnessed rapid growth, reaching a total issuance of AED 120.3 billion by the first half of 2023. This growth underscores the compatibility between Islamic law and sustainable finance principles.
Moving forward, the UAE remains committed to advancing its position in the global Islamic finance landscape, leveraging its regulatory framework and sustainability initiatives to foster continued growth and innovation in the sector.
