The UAE ranks fourth among the largest Islamic financial markets in the world in terms of assets according to the Islamic Finance Development Indicator Report 2023 (IFDI 2023), published by the Central Bank of the UAE (CBUAE).
The report found that the Islamic finance sector grew by 11% in 2022, bringing the value of global Islamic financial assets to Dh16.5 trillion ($4.5 trillion). The sector has achieved a 69% increase over 5 years and a 163% increase over the past decade.
The main Islamic financial markets are located in the Gulf Cooperation Council (GCC), Southeast Asia, and South Asia.
In the UAE Islamic finance has developed since the establishment of the first Islamic bank in 1975 through several sectors including Islamic banking, takaful insurance, and sukuk, the bank explained.
In 2022, there were a total 24 Islamic banking institutions in the UAE, eight of which were standalone and 16 were Islamic windows of conventional banks. Currently, the assets of Islamic banks and windows in conventional banks represent 23% of total banking assets in the UAE, after achieving a growth of 16% over the past five years.
The sukuk market is also witnessing an expansion in the UAE, as the federal government recently issued Islamic treasury sukuk in the UAE dirham, which could be a catalyst for other entities to issue Islamic sukuk, the CBUAE said.
The report stated that the rapid growth rate of ESG-related sukuk issuances is one of the indicators of the rapid development of sustainable Islamic finance, with total issuances reaching AED 120.3 billion by the first half of 2023.
A survey of the UAE Islamic banking sector, covering local and foreign full-fledged Islamic banks and Islamic banking windows of conventional banks, revealed that 79% have a sustainability strategy, while 74% had had their strategy approved at the board level.
All of the Islamic banks said they have sustainability strategies in place.
In January, Yazrin Syakhairi, the Malaysian Trade Commissioner, under the Trade Section of the Consulate General of Malaysia in Hong Kong (MATRADE), predicted that the global Islamic finance market would reach $4.9 trillion by 2025.
Last December, the Abu Dhabi Islamic Bank (ADIB) listed the world’s first USD-denominated green sukuk on the Abu Dhabi Securities Exchange (ADX).
