UAE's new Islamic finance strategy to spur growth, strengthen banking infrastructure –Fitch
13 May 2025 01:02
KHALED AL KHAWALDEH (ABU DHABI)The UAE's Islamic finance and halal economy is poised for significant growth following the recent approval of a national strategy aimed at positioning the country as a global leader in Islamic financial services and halal production.According to a new analysis by Fitch Ratings, the UAE's ambitious targets, if achieved, could more than double the value of Islamic banking assets and sukuk issuance over the next six years, solidifying the nation's leadership in these key sectors.The strategy, approved by the UAE Cabinet on May 6, sets out a vision to expand the Islamic financial ecosystem and boost the export of halal products. Among its headline objectives is increasing Islamic banking assets from Dh986 billion to Dh2.56 trillion by 2031. It also aims to grow local sukuk issuances to Dh660 billion and international sukuk listings in the UAE to Dh395 billion.'The UAE's Islamic finance industry is long established, and it is expected to continue to expand in the short-to-medium term on the back of significant bottom-up and top-down demand and regulatory initiatives to further deepen the Islamic finance ecosystem and infrastructure,' the Fitch report said.'Details of the new strategy are yet to be revealed, and it is yet to be seen what steps the government will take to achieve its targets and what challenges it might face.'According to Fitch, the UAE's Islamic finance sector is already valued at over $285 billion as of the first quarter of 2025. Islamic banks in the country account for more than 17% of total banking system assets, with their annual growth rate outpacing that of conventional banks, according to CBUAE data. The nation also holds a 6.5% share of global sukuk issuance, ranking fourth worldwide.Fitch cautioned, however, that the UAE could face increasing competition from large conventional banks and global sukuk markets. The report said that while the UAE's targets are ambitious and achievable, execution risks remained, including those linked with evolving Sharia compliance requirements and market competition from conventional banks with strong government links.Fitch's report also highlighted the UAE's growing dominance in the sukuk market, noting that 92.1% of Fitch-rated UAE sukuk are investment grade, with nearly 40% in the 'A' category. It also noted the increasing diversification of the market with financial institutions accounting for half of all issuers, and the rest spread across corporates, infrastructure projects, and sovereign entities.Fitch said sukuk issuance in the UAE reached $6.5 billion in the first four months of 2025, representing a 28% year-on-year increase, compared to a 6.7% rise in conventional bonds.Boosting Halal IndustryAlongside the financial sector push, the UAE strategy emphasises strengthening its halal production and export capabilities. This includes boosting domestic halal manufacturing to tap into the global Islamic consumer market, which is projected to exceed $3 trillion in the coming years.
The UAE aims to build on its reputation as a regional hub for halal products, leveraging its advanced logistics infrastructure and regulatory frameworks to enhance the competitiveness of Emirati-made halal goods on the global stage.
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