UAE’s Islamic finance a model of growth and sustainability

The Islamic finance sector in the UAE benefits from a dynamic economic environment and advanced regulatory policies that support Sharia-compliant financial activities.

Since the establishment of the UAE’s first Islamic bank in 1975, the sector has grown significantly over the decades, becoming a fundamental pillar of the national economy. The industry encompasses Islamic banks, Islamic windows in conventional banks, and sukuk (Islamic bonds), which have witnessed rapid growth in both domestic and international markets.

The UAE is committed to developing economic policies and legislation to enhance Islamic finance and the broader Islamic economy.

These efforts align with national objectives to ensure sustainable economic growth and establish the UAE as a global hub for the Islamic economy.

The UAE ranked among the top three Islamic economies worldwide in the 2022 State of the Global Islamic Economy Report for the third consecutive year.

It ranked fourth globally in Islamic financial markets by assets, according to the 2023 Islamic Finance Development Indicator (IFDI).

According to the latest data issued by the Central Bank of the UAE (CBUAE) for September 2024, Islamic banks accounted for approximately 22 per cent of the total banking credit in the UAE, with investments reaching Dhs152.3 billion by the end of third quarter of 2024.

Fitch Ratings projects that Islamic banks in the UAE will grow faster than their conventional counterparts over the medium term.

A CBUAE study found that 79 per cent of Islamic banks in the UAE have sustainability strategies, with 74 per cent having them approved at the board level. Also, all Islamic banks reported having established sustainability strategies, whereas some conventional banks with Islamic windows are still developing theirs.

The UAE has witnessed significant growth in the Sukuk market as the Federal Government introduced dirham-denominated Islamic Treasury Sukuk, encouraging broader sector participation.

The issuance of Green Sukuk since 2019 has driven growth in sustainable financing. The UAE ranks first in the region and second globally in outstanding sustainability Sukuk.

According to Fitch Ratings, sukuk and bond issuances in the UAE grew by 13.1 per cent year-on-year, reaching $294.4 billion by Q3 2024, with sukuk accounting for approximately 20 per cent of total issuances.

UAE debt capital markets are expected to surpass $300 billion by the end of 2024, driven by the county’s strategic initiatives to attract both regional and international investors.

According to Fitch Rankings, the UAE holds 6.6 per cent of the global sukuk market, ranking fourth globally in all currencies.

The UAE is one of the largest US dollar debt issuers in emerging markets (excluding China), with a share of 8.9 per cent of the total in H1 2024.

S&P Global Ratings expects strong growth in the UAE’s Islamic Finance sector to continue over the coming period, supported by the strong performance of the non-oil economy.

The COP28 held in the UAE highlighted the synergy between Islamic finance principles and sustainability, showcasing the sector’s potential to drive sustainable development. This alignment is expected to further bolster the growth of Islamic finance in the future.

The UAE is a leading global destination for sukuk issuances. Nasdaq Dubai, the world’s largest exchange for sukuk, reported the total value of sukuk listed in Dubai reaches $98.9 billion in December.

Meanwhile Dubai Islamic Bank recently relaunched the DIB XTRA Salary Transfer Campaign to reward citizens and residents of the UAE who are looking for an enhanced banking experience. Synonymous with its name, XTRA, the re-energised campaign is loaded with extra benefits that are designed to provide a complete array of unmatched privileges for customers. With this successful launch, DIB is reinforcing its commitment to providing meaningful solutions to customers – solutions that truly matter to them.

The new phase of ‘DIB XTRA’ introduces one of the most competitive joining bonuses in the market. As part of the campaign, customers who open a new DIB XTRA Salary Transfer Account and transfer their new salary to the bank, can enjoy up to Dhs16,000 guaranteed joining bonus. Additionally, customers joining this campaign may avail a new DIB Finance product or Credit Card, having them entitled to apply for a Personal Finance, Auto Finance or Home Finance.

In order to reward customers who opt for an easier and more convenient way to open their account via the bank’s digital channels, DIB is offering an extra 15 per cent joining bonus.

In addition to the competitive joining bonuses, the campaign offers a comprehensive suite of value-added benefits such as zero-balance account, eliminating the need to maintain minimum balances.

WAM