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2023 was a good year for Shariah-compliant banks: The value of Shariah-compliant banks’ loan books crossed the AED 700 bn threshold for the first time in 2023, climbing 11.5% y-o-y to AED 703.1 bn, according to recent data (pdf) from the Central Bank of the UAE. The banks’ gross credit — the amount of funds available to lend during the year — rose 7.8% y-o-y to AED 428.9 bn during the period, while deposits increased 12.6% y-o-y to AED 495.5 bn, according to separate figures (pdf).
Islamic banks’ total investments rose 27.1% y-o-y to AED 132.7 bn in 2023, split mostly into bonds held to maturity (AED 100.4 bn), debt-based financial instruments, AED 2.6 bn in shares, and AED 11 bn in other investments.
Shariah-compliant banks accounted for a 17.3% share of total bank assets during the year, up from 17.2% in December 2022.
Background: The UAE’s Shariah-compliant debt market had a growth spurt in 2023, with Sukuk issuances in all currencies accelerating by 115% y-o-y, and accounting for 8.7% of all debt issuances.
More growth expected this year: Fitch Ratings expects the debt capital market to expand some 11% y-o-y to USD 300 bn (AED 1.1 tn) in 2024-2025, on the back of an anticipated “diversification of funding and capital market developments,” including an increase in the share of sukuk and AED-denominated issuances in the UAE’s debt mix.
