According to Fitch Ratings, the recently approved national strategy for Islamic finance and halal industries in the United Arab Emirates is expected to significantly enhance the country’s position in the global Islamic bond (Sukuk) market.
Although the full implementation details of this strategy have yet to be announced, these ambitious goals fully demonstrate the determination to vigorously expand the already stable Islamic financial ecosystem from top to bottom. The strategy approved at this week’s cabinet meeting sets a clear vision: to increase the assets of Islamic banks from 986 billion dirhams to 2.56 trillion dirhams by 2031, achieving a growth of more than double. Meanwhile, the local issuance volume of Islamic bonds will be raised to 660 billion dirhams, and the scale of international Islamic bonds listed in the United Arab Emirates will be increased to 395 billion dirhams. The implementation of this strategy will be supervised by a committee chaired by the governor of the central bank. Data from the Central Bank of the United Arab Emirates shows that the assets of Islamic banks in the country have accounted for more than 17% of the total assets of the banking system, and their growth rate has exceeded that of traditional banks.
Fitch estimates that as of the first quarter of 2025, the value of the Islamic financial industry in the United Arab Emirates exceeded 285 billion US dollars. In the first four months of this year, the issuance volume of Islamic bonds increased by 28% year-on-year, reaching 6.5 billion US dollars. By contrast, the issuance volume of traditional bonds increased by only 6.7% during the same period.
It is worth noting that during the global market turmoil in April caused by factors such as the new tariffs imposed by the United States, the issuers of the United Arab Emirates were more inclined to issue Islamic bonds when entering the US dollar market. At present, the number of Islamic bonds listed on the Nasdaq Stock Exchange in Dubai has exceeded the total number of traditional bonds and stocks. It is expected that this exchange will remain the main listing venue for dollar-denominated Islamic bonds globally. Fitch has currently rated $28 billion worth of UAE Islamic bonds, of which 92.1% are investment grade.
Opportunities and challenges coexist
However, the Islamic financial industry in the United Arab Emirates still faces challenges. Competition with large state-owned traditional banks may further intensify, and the constantly changing compliance requirements of Sharia law may also make the bond issuance process more complicated.
Despite this, with the advantages of regulatory support, the increasing diversity of issuers and the growing demand from investors, the new strategy of the United Arab Emirates is expected to consolidate its leading position in the global Islamic finance and halal trade sectors in the next decade.
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