50
YEARS OF ISLAMIC BANKING
AND FINANCE IN THE UAE A SPECIAL FEATURE BY KHALEEJ TIMES
UAE: A Global Hub for Islamic Finance Transformative journey of the sector reflects the UAE’s commitment to economic diversification, social responsibility, and integration of Islamic values in modern financial services
T
Muzaffar Rizvi HE UAE has emerged as a global hub for Islamic finance over the past five decades, marking a significant transformation in the financial landscape of the region and beyond. The growing sector benefits from a dynamic economic environment and advanced regulatory policies that support Shariah-compliant financial activities. There is no second opinion that 50 years of Islamic banking in the UAE reflects a remarkable journey characterised by growth, innovation, and resilience. The sector has not only enriched the emirate’s financial landscape but has also contributed significantly to the global Islamic finance industry, exceeding $2.44 trillion in assets worldwide by growing at an accelerated pace of 11.4 per cent. Since the launch of Dubai Islamic Bank — the UAE’s and the world’s first Islamic bank — in 1975, the sector has grown significantly over the past five decades, becoming a fundamental pillar of the national economy. This landmark institution served as a pioneer, proving that Shariah-compliant banking could be both profitable and sustainable without interest-based transactions by promoting ethical investment. The Dubai Islamic Bank establishment paved the way for promoting Islamic fi-
nance in the country. The 1980s and 1990s witnessed a remarkable expansion in the Islamic finance sector with several other banks and financial institutions emerging. These included Abu Dhabi Islamic Bank and Sharjah Islamic Bank in catering to the growing demand for Shariah-compliant financial products. The government played a significant role in developing this promising sector, promoting policies that fostered an environment conducive to Islamic financial institutions. The establishment of regulatory bodies, such as the Central Bank of the UAE and Higher Shariah Authority, and initiatives to standardise Islamic financial products and services contributed significantly to the sector’s growth in the past 50 years. Another notable milestone in the UAE’s Islamic finance industry was the establishment of the Dubai International Financial Centre in 2004, which provided a sophisticated regulatory framework and an international platform for Islamic finance. The centre has not only attracted various Islamic financial institutions but has played a major role in positioning the UAE as a global leader in Islamic finance. PROMISING OUTLOOK Today, the UAE is considered one of the leading markets for Islamic finance as it has a well-established Islamic financial industry, comprising Islamic banks, Islamic banking windows, Islamic finance companies, and Islamic insurance (takaful) companies. For three consecutive years, it was ranked among the top three Islamic economies worldwide in the 2022 State of the Global Islamic Economy Report. It was ranked fourth globally in Islamic financial markets by assets, according to the 2023 Islamic Finance Development Indicator. A recent study, conducted by the Central Bank of the UAE, found that 79 per cent of Islamic banks in the UAE have sustainability strategies, with 74 per
UAE ISLAMIC FINANCE KEY MILESTONES
1975
1979
1985
1998
2002
The UAE and the world’s first Islamic commercial bank established: Dubai Islamic Bank
The UAE’s first takaful insurance company, Islamic Arab Insurance Company (Salama), established
The UAE Islamic banking law introduced under Federal Law 1985
Establishment of the UAE’s second Islamic Bank: Abu Dhabi Islamic Bank
Sharjah Islamic Bank became the first bank to be converted into a full-fledged Islamic bank.
2010
2011
2014
2017
2018
Islamic Certificate of Deposit was issued by the Central Bank of the UAE
Islamic banking assets reached 9.1% of the total banking assets
Govt of Sharjah debut sukuk launched
Higher Shariah Authority was formed and it commenced operations in 2018
Islamic bank assets reached 25% of the total banking assets
2019
2020
2022
2023
2024
DFM launched DFM Shariah Index, the first of its kind in the UAE
Consolidation between two Islamic banks: DIB and Noor Bank
Debut sustainable sukuk by Islamic bank in the UAE: DIB
First Abu Dhabi Bank issued first local currency green sukuk
Islamic financing accounting for 29% of total sector financing at the end of first half of 2024
Sources: Central Bank of the UAE and Fitch Ratings
cent having them approved at the board level. Also, all Islamic banks reported having established sustainability strategies, whereas some conventional banks with Islamic windows are still developing theirs. “Islamic banks accounted for approximately 22 per cent of the total banking credit in the UAE, with investments reaching Dh152.3 billion by the end of third quarter of 2024,” according to the latest data issued by the Central Bank of the UAE for September 2024.
Fitch Ratings projects that Islamic banks in the UAE will grow faster than their conventional counterparts over the medium term due to favourable operating conditions in 2024 and 2025. The agency, which recently upgraded the UAE bank operating environment score to ‘bbb+’ from ‘bbb’ considers the emirate as a key hub for Islamic finance due to the beneficial economic environment, continued non-oil sector expansion, strong liquidity and improved asset quality.
Furthermore, the rating agency noted that Islamic financing now accounted for 29 per cent of total sector financing at the end of first half of 2024 as it rose 5.7 per cent during the January-June 2004 period compared to 5.3 per cent of conventional banks. S&P Global Ratings also expects strong growth in the UAE’s Islamic finance sector to continue over the coming period, supported by the strong performance of the non-oil economy. — muzaffarrizvi@khaleejtimes.com
Islamic Finance: Ruya’s Role in Shaping a Sustainable Future As the Islamic finance sector continues to grow and evolve in the UAE, ruya is proud to be at the forefront of this transformation
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N the dynamic landscape of the UAE’s financial sector, Islamic finance stands out not just for its robust growth but also for its innovative integration of technology and ethics. At ruya, a digital-first Islamic bank headquartered in Ajman, we are committed to leveraging these trends to redefine financial services through a Shariah-compliant lens. This article explores how ruya is at the forefront of propelling the Islamic finance industry forward, focusing on sustainability, technological innovation and the broad appeal of ethical banking. Our journey began with a simple yet powerful vision: to make ethical banking accessible, seamless and community driven. In our first year, we have introduced Personal Banking services for our retail customers, Investment Deposits, Kids Savings Account and tailored Business Banking solutions — all designed to meet the evolving needs of individuals and businesses in the UAE. Pioneering the Future with Innovation, Sustainability At ruya, we believe the future of Islamic banking is digital, inclusive and sustainable. That’s why we have embraced AI-driven insights, seamless digital onboarding and customer-first solutions to ensure a banking experience that is effortless, ethical and built on the values of the Islamic Economy and Islamic Finance. We stand for fairness, transparency and social responsibility in everything we do. For entrepreneurs and businesses, ruya offers flexible business banking solutions designed to support growth at every stage — whether you’re starting your
first venture or expanding your company. Enjoy the benefits of a digital-first Islamic bank, with no minimum average balance, no hidden fees and a fully integrated digital experience. With UAE Pass integration, opening a ruya account takes less than three minutes, making financial access faster, more seamless and hassle-free for individuals. As the UAE accelerates its green finance agenda, ruya is embedding sustainability into its core. Beyond our operations, we strive to make a lasting impact — through our partnership with Sacred Groves, we actively support forest conservation, reinforcing our commitment to environmental responsibility alongside economic growth.
in Islamic finance, paving the way for a more sustainable and ethical financial future.
Conclusion As the Islamic finance sector continues to grow and evolve in the UAE, ruya is proud to be at the forefront of this transformation. Our focus on technology, sustainability and inclusive financial practices is not just about business growth — it’s about setting a benchmark for what Islamic banking can achieve in the modern world. By embracing these trends, ruya is not only contributing to the financial sector but is also playing a crucial role in the broader economic and social landscape of the UAE. Join us at ruya as we continue to drive innovation and excellence
About ruya Headquartered in Ajman and launched in 2024, ruya (Ruya Islamic Community Bank LLC) is a fusion of innovative technology and the enduring principles of Islamic banking, designed for individuals and businesses alike. It delivers a seamless digital banking experience built on robust security and intuitive design.
Be Part of ruya’s Journey We are just getting started, and we invite you to experience the future of Islamic banking. • For business owners & entrepreneurs: Discover how ruya’s business banking solutions can support your success. Open your business bank account with ruya today and experience banking designed for growth. Visit www.ruyabank. ae/business-banking/ • For individual: You can open your account in less than 3 minutes and start banking seamlessly. Download the ruya app today or visit www.ruyabank.ae
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