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Islamic Finance

The Islamic Finance industry is growing at an accelerated pace, exceeding US 2.44 trillion in assets globally, and recording a growth rate of 11.4%. The Islamic Finance industry is primarily manifested in banking, insurance (Takaful) and asset management sectors.

The term “Islamic Finance” or “Shari’ah Compliant Finance” (and other similar terms) are commonly used to refer to the contemporary financial industry that has set compliance with Islamic commercial law as one of its main criteria in the day-to-day operations.

 

One important aspect of Islamic commercial law is the consideration given to the consequences of commercial transactions on individuals, society and the environment, through a set of rules and parameters. Consequently, transacting in any subject matter deemed harmful or unethical on an individual or society basis is illegitimate. Furthermore, the absence of impediments of injustice, ambiguity (including gambling) and riba (charged interest) from a transaction is also one of the key principles of Islamic finance.

Islamic Finance In The UAE

From the very beginning, the UAE has been at the forefront of the Islamic Finance. The first Islamic commercial bank globally was established in the UAE during 1975, under the vision and patronage of the country’s leadership, to provide the UAE community with Shari’ah-compliant financial solutions. It showcased how a modern financial institution could set compliance with Shari’ah as its primary objective while providing innovative Shari’ah compliant financial products and services.

 

Today, the UAE has a well-established Islamic financial industry, comprising Islamic banks, Islamic banking windows, Islamic finance companies and Islamic insurance (Takaful) companies. There are six fully-fledged local Islamic banks and two foreign Islamic banks licensed to operate in the UAE. In addition, fifteen conventional banks have also established Islamic banking windows, increasing their diversity and market outreach. There are also nine Islamic finance companies in the UAE and twelve Islamic insurance (Takaful) companies.

Some of the significant developments of the UAE Islamic finance industry are provided in the timeline below.

1975

Dubai Islamic Bank

The First Islamic Commercial Bank

1985

Federal Law No. 6 of 1985

Law regarding Islamic banks, financial institutions and investment companies. The first law to introduce the concept of the Higher Shari’ah Authority

1988

Abu Dhabi Islamic Bank

The Second Islamic Bank

2002

Sharjah Islamic Bank

The first bank to be converted into a fully fledged Islamic bank

2010

Islamic Certificate of Deposit

Issued by the CBUAE

2011

Islamic Banking assets reached 9.1% of the total banking assets

Rapid growth after the financial crises

2014

Islamic Institutions

8 full-fledged banks 23 windows 12 finance companies

2017

Establishment of the Higher Shari’ah Authority

Commenced the work on 2018

2018

Islamic Bank Assets

Reached 25% of the total banking assets

2018

Decretal Federal Law No. (14) of 2018

Law Regarding the Central Bank & Organization of Financial Institutions and Activities

2018

AAOIFI

Adoption of AAOIFI Shari’ah Standards

2019

IFSB

Adoption of IFSB Prudential Standards

2021

Takaful Companies Formally under CBUAE

Takaful Companies Formally under CBUAE

About the Higher Shari’ah Authority

The Higher Shari’ah Authority (“HSA”) was established, and its Members appointed, in line with resolutions enacted by the UAE Cabinet. Decretal Federal Law No. (14) of 2018, regarding the CBUAE and the organisation of financial institutions and activities, reaffirmed HSA’s establishment and provided further details of its mandate.

Discover More
Islamic Banking

Islamic Banking

Islamic Insurance Companies

Islamic Insurance Companies

Related Islamic Finance News


CBUAE Policies

Enforcement Policy

01 February 2021

Related Islamic Finance Regulations


Standards

Standard re Liquidity at Islamic Banks

31 January 2022


Guidance/Notice

Guidance Note Re Annual Shari’ah Report of Internal Shari’ah Supervision Committee

31 March 2021


Guidance/Notice

Guidance Note Re Charter of Internal Shari’ah Supervision Committee

31 March 2021


Risk Management

Standard Re Risk Management Requirements For Islamic Banks

10 February 2021


Standards

Standard Re. Shari'ah Governance for Islamic Financial Institutions

30 November 2020


Standards

Standard Re. Regulatory Requirements for Financial Institutions Housing an Islamic Window

30 November 2020


Regulations

Decision No (50) of 2019 Concerning Enhancing the Shari’a Controller’s Role in Takaful Insurance Companies Operating in the state

16 April 2019


Pre-2012 Regulations

Federal Law No. (6) of 1985 Regarding Islamic Banks, Financial Institutions and Investment Companies

15 December 1985

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Last updated on: Tuesday 09 August 2022

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