Islamic banking assets in the United Arab Emirates have exceeded Dh1 trillion ($296 billion) as of the end of 2024, according to recent analysis from a global rating agency.

Following a slowdown during the pandemic, the sector has seen a robust rebound with a compound annual growth rate (CAGR) of 11 percent from 2021 to 2024. As of the end of 2024, Islamic banks accounted for 24 percent of total banking assets in the country.

Currently, the banking environment in the UAE is characterized by stability, bolstered by ongoing diversification efforts and structural reforms conducive to growth in the non-oil economy.

The UAE government has unveiled plans to significantly enhance the assets of Islamic banks and the value of locally listed sukuk by 2031. Specifically, the targets set aim for Islamic bank assets to reach Dh2.56 trillion, with local Islamic sukuk exceeding Dh660 billion and international sukuk totaling Dh395 billion.

In the current year, the UAE witnessed the issuance of $12.7 billion (Dh46.60 billion) in sukuk, of which $4 billion was issued by local banks.

The Central Bank of the UAE is working to advance the Islamic finance sector, with an objective to position the country as an international hub for Islamic finance.

Efforts are being made to enhance market development, competitiveness, and sustainability.

The UAE's Islamic financial sector includes nine fully-fledged Islamic banks, alongside several Islamic finance companies and Islamic insurance (Takaful) providers.

Analysts note that the UAE's strategic initiatives to strengthen the Islamic finance sector are expected to expand the global sukuk market, which is currently led by Malaysia and Saudi Arabia, with global issuances projected to reach approximately $242 billion in 2024.

The anticipated growth in Islamic banking assets is expected to solidify the UAE's ranking as the third-largest contributor to the Islamic finance market, following Malaysia and Saudi Arabia.