UAE's Islamic Finance And Halal Industry Experience Significant Growth Amid Economic Diversification Efforts

The UAE is solidifying its position as a global leader in Islamic finance and the halal industry. This aligns with its vision to diversify the economy and boost international competitiveness. The country is experiencing growth in these sectors, supported by progressive government policies, a modern regulatory framework, and advanced infrastructure.

In May, the UAE introduced a national strategy to advance Islamic finance and the halal industry. This plan aims to create a comprehensive ecosystem for Islamic financial activities like banking, Takaful (Islamic insurance), Sukuk (Islamic bonds), and non-banking financial services, adhering to global standards.

The Central Bank of the UAE reported in February that Islamic banks now represent about 18% of total banking assets and 22.8% of total credit in the national banking sector. The Islamic Sukuk market has notably expanded, marked by the federal government's launch of dirham-denominated Islamic Treasury Sukuk (T-Sukuk) in 2023.

Jamal Saleh, Director-General of the UAE Banks Federation (UBF), stated that the strategy sets ambitious goals to enhance the Islamic economy's role domestically, regionally, and internationally. He highlighted significant progress in Islamic banking and Sharia-compliant finance as part of the nation's diversification efforts.

The UAE is also establishing itself as a global hub for the halal industry. Under a new national strategy, it plans to boost halal exports from AED74 billion to AED315 billion by 2031. This will leverage its strategic location and world-class infrastructure to meet growing global demand for halal products.

Saleh Lootah, Chairman of the UAE Food and Beverage Manufacturers Group, described this strategy as pivotal for positioning the UAE as a centre for halal production. He noted increasing interest from local manufacturers in expanding into this sector due to rising global demand for halal goods.

A report by Bonafide Research projects that the UAE's halal food and beverage market will surpass $31.27 billion by 2029. This growth reflects heightened consumer awareness of dietary and ethical standards both locally and globally.

Strategic Location Advantage

The UAE's strategic location as a trade and tourism hub significantly contributes to this expansion. It attracts both local and international consumers seeking reliable halal-certified products, reinforcing its status as a leading centre for halal commerce.

As of May, Nasdaq Dubai listed over US$95.7 billion in Sukuk, underscoring the UAE's role as a major hub for Sharia-compliant fixed-income instruments. In 2023, it ranked fourth globally in Islamic financial markets by assets according to the Islamic Finance Development Indicator.

The impressive growth trajectory continues with total credit granted by Islamic banks reaching AED503.5 billion by February 2025—a 16% increase year-on-year. Private sector credit alone rose to AED350.4 billion with an annual growth rate of 13.2%, while deposits at Islamic banks surged to AED595.3 billion with an annual increase of 16.9%.

With inputs from WAM