Global Islamic Finance Set To Hit $6 Trillion In 2026 As Industry Posts Strong Double‐Digit Growth

The global Islamic finance industry is entering 2026 with powerful momentum as total assets surge toward the $6 trillion mark, driven by robust expansion across banking, capital markets, takaful, and a rapidly rising Islamic FinTech sector.

According to a new assessment shared by the AlHuda Centre of Islamic Banking and Economics, global Islamic finance assets climbed to $5.2 trillion in 2025, reflecting 14.9 per cent year‐on‐year growth.“The Islamic finance industry has steadily evolved from a niche, alternative financial system into a systemically important component of the international financial architecture,” said CEO Zubair Mughal, noting the sector's resilience despite global inflation, geopolitical disruptions, and tightening financial conditions.

Islamic banking remains the backbone of the industry, accounting for 72 per cent of total assets - more than $2.7 trillion. Financing grew more than 17 per cent year‐on‐year in 2025, while deposits expanded by nearly 9 per cent, buoyed by strong activity in the GCC, Asia, and a growing cluster of African markets. Several African jurisdictions posted growth rates exceeding 20 per cent, signaling what Mughal described as a“meaningful geographical rebalancing” within the industry.

But he also warned of persistent structural challenges: limited Shariah‐compliant liquidity instruments, overreliance on sovereign sukuk, and insufficient diversification beyond banking.“Without deeper and more liquid Islamic capital markets, banking-led growth alone may not be sufficient to ensure long-term financial resilience,” the report noted.

The sukuk market was one of 2025's standout performers. Global issuance surpassed $230 billion in 2024 and continued expanding in 2025, supported by sovereign borrowing needs and infrastructure financing. New entrants - including Tanzania, Zambia, and Kenya - helped integrate Africa more firmly into global sukuk markets. However, Mughal pointed out continuing weaknesses such as“shallow secondary market liquidity” and“a relatively concentrated investor base.”

Beyond sukuk, Islamic funds, asset management, and sustainability-linked instruments showed moderate growth, helped by improving equity market conditions. Green sukuk and ESG‐aligned Islamic funds gained wider visibility but remain a small share of the market.

The fastest-growing segment, however, is Islamic FinTech - now representing 3 per cent of total assets, but expanding far faster than traditional sectors. Digital payments, Shariah‐compliant BNPL, embedded finance, and applications of AI and blockchain have enabled the subsector to achieve“regional scale” in several markets, with double-digit transaction growth. Mughal emphasised FinTech's strategic role in boosting financial inclusion across Africa and South Asia.

Geographically, Asia and the GCC still dominate, jointly accounting for more than 50 per cent of Islamic finance assets. But Africa is now the fastest-growing frontier, with Ethiopia, Ghana, Uganda, and Somalia/Somaliland expected to formally enter the market in 2026. Europe, too, is showing renewed interest, with Italy, Switzerland, Portugal, and the Netherlands exploring Islamic banking frameworks.

Looking ahead, Mughal said 2026 presents opportunities in capital‐market deepening, cross‐border FinTech expansion, and Africa-focused infrastructure finance. Still, he cautioned that regulatory gaps, concentration risks, and market fragmentation must be addressed to ensure long-term stability.

“With assets on track to cross $6 trillion by the end of 2026, Islamic finance is transitioning from regional concentration to genuine global relevance,” Mughal said.“If structural imbalances are addressed and innovation is effectively harnessed, Islamic finance is well‐positioned to emerge as a mainstream pillar of ethical and inclusive global finance.”

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