The UAE's Islamic finance sector is entering a new phase of accelerated growth, backed by a national strategy that aims to more than double Islamic banking assets and sukuk listings by 2031. This move reflects a broader global trend, as Islamic finance continues to evolve from a niche offering into a mainstream financial force, now valued at over $5.5 trillion in assets worldwide.

According to Standard Chartered's latest report, Islamic Banking for Corporates: Broadening Horizons, the UAE ranks as the fourth-largest Islamic finance jurisdiction globally, with Islamic banks accounting for 18 per cent of total banking assets. As of the first half of 2025, Islamic banking assets in the UAE stood at $242.7 billion, growing at a compound annual rate of 10 per cent. Shariah-compliant deposits reached $179.2 billion, representing 22 per cent of total deposits.

“The UAE's Islamic finance industry is well-established and consistently outpaces conventional banking growth,” the report notes.“Looking ahead, the strategy is poised to strengthen regulatory frameworks and support the growth of local Islamic banks.”

The UAE's newly approved strategy for Islamic Finance and halal industry sets ambitious targets, including increasing Islamic banking assets to Dh2.56 trillion ($697.5 billion) and boosting Sukuk issuances to Dh660 billion ($179.8 billion) by 2031. The plan also aims to expand international sukuk listings to Dh395 billion ($107.5 billion), positioning the UAE as a global leader in Islamic capital markets.

This surge in activity is part of a wider transformation across the GCC and beyond. Islamic banking assets in the GCC region are projected to grow at 7 per cent CAGR between 2025 and 2029, reaching $1.94 trillion. Saudi Arabia, where Islamic finance accounts for 75 per cent of total banking assets, is also driving growth through its Vision 2030 initiative.

Globally, corporate sukuk issuance is gaining traction, with international issuances accounting for 58 per cent of proceeds in the first half of 2025-up from 45 per cent in 2024.“This signals growing demand from investors beyond traditional Islamic finance markets,” the report states,“affirming Sukuk's role as a globally relevant financing instrument.”

Islamic finance's appeal lies not only in its ethical foundation but also in its alignment with environmental, social, and governance (ESG) principles. Sustainable Sukuk, for instance, were subscribed at an average of 4.3 times their issuance value in 2024, compared to 3.1 times for traditional Sukuk. This demand is increasingly driven by non-traditional investors, particularly from Europe.

“Islamic finance and ESG principles are inherently complementary,” the report explains.“Shariah screening aligns closely with ESG's negative screening, ensuring financing upholds both ethical integrity and environmental responsibility.”

Digital innovation is also reshaping the Islamic finance landscape. Tokenised sukuk and blockchain-enabled platforms are streamlining cross-border transactions and reducing issuance costs. Malaysia is leading efforts to integrate digital assets into Islamic finance, while the UAE is exploring similar avenues to enhance its financial infrastructure.

“Over the past decades, Islamic finance has transformed from a niche proposition into a mainstream industry, spanning more than 80 countries and exceeding $5 trillion in assets. Its growth is underpinned by both demand and innovation - from trade finance to working capital, from sustainable sukuk to treasury solutions,” says Khurram Hilal, CEO, Group Islamic Banking Standard Chartered.

For corporates, Islamic banking offers a strategic edge. Sectors such as real estate, logistics, and food production are leveraging Shariah-compliant financing to access new markets and diversify funding sources. In July 2025, UAE-based developer Arada raised $450 million through its largest Sukuk issuance to date, with Standard Chartered acting as joint global coordinator. The offering was oversubscribed 4.4 times and achieved the tightest reoffer yield for Arada at 7.15 per cent.

“Investor demand for Shariah-compliant assets continues to outpace supply,” the report highlights.“Corporates have successfully leveraged this demand to negotiate competitive pricing and access international investment pools.”

As Islamic finance continues to expand, the UAE's proactive stance and strategic investments are positioning it as a global hub for ethical and sustainable finance. For corporates navigating growth in a values-driven world, Islamic banking is no longer just an alternative-it's a competitive advantage.

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