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Islamic Finance

The Islamic Finance industry continues to experience accelerated growth, with global assets surpassing USD 3.38 trillion and has achieved growth rates of up to 11%. Islamic Finance primarily operates across Islamic banking, Takaful insurance, capital markets, and asset management sectors.

The term “Islamic finance” or “Shari’ah compliant finance” (and other similar terms) are used to refer to a financial sector that functions fully in accordance with Islamic Shari’ah principles in respect of all its operations and activities. The industry is established on the principle of sharing profit and loss as a vehicle for fund mobilization, and emphasizes real economic activity and added value in its dealings.

 


A key element of Shari’ah principles in financial transactions is the consideration given to the outcomes and impact of such transactions on individuals, wider society, and the environment. This is governed by a comprehensive framework of rules and parameters. Accordingly, any transaction that results in harm to individuals or the broader community, or is deemed unethical, is considered invalid. Furthermore, fundamental principles of Islamic finance require the elimination of injustice, illicit gain, deception, ambiguity (gharar - including gambling), and interest (riba) from financial dealings.

Islamic Finance in the United Arab Emirates

Since its inception, the UAE has been at the forefront of Islamic finance. The world’s first Islamic commercial bank was established in the UAE in 1975, under the patronage and support of the country’s wise leadership, to provide individuals and institutions with financial solutions aligned with Islamic Shari’ah principles. The UAE has demonstrated that modern financial institutions, founded on a commitment to Shari’ah compliance, are capable of delivering innovative and Shari’ah-compliant financial products and services.

Today, the UAE stands as one of the most advanced countries in Islamic finance, supported by a well-developed banking industry that comprises Islamic banks, Islamic banking windows, Islamic finance companies, and Takaful insurance providers. The Central Bank supervises 43 Islamic financial institutions, categorized as follows:

 

Islamic Banks

9

Islamic Banking Windows

15

Islamic Finance Companies

9

Takaful Insurance Companies

10

UAE Islamic Finance Significant Milestones

1975

The establishment of the first Islamic commercial bank globally, took place in the UAE, a bank which still provides financial and investment services to its clients. This bank established a standard for all forthcoming institutions incorporated either within or outside the UAE.

1979

First Takaful insurance company was established in the UAE, providing Shari’ah-compliant insurance. This company created a benchmark for all subsequent takaful companies.

1985

Issuance of Federal Law No. (6) of 1985 concerning Islamic banks, financial institutions, and investment companies. This was one of the earliest laws promulgated globally in respect of Islamic finance. This law also marked the introduction of the concept of a Higher Shari’ah Authority for the first time.

2002

The world’s first ever conversion of a conventional bank into a fully-fledged Islamic bank. This transformation created a benchmark for any institution wishing to convert its activities in order to become compliant with Shari’ah principles.

2010

Islamic Deposit Certificates issued by the CBUAE to assist banks to manage liquidity. These instruments were designed to manage excess liquidity within Islamic banks.

2015

The world’s first conversion of an a conventional insurance company into a Takaful insurance company

2017

The establishment of the Higher Shari’ah Authority and the appointment of its members pursuant to resolutions issued by the UAE Cabinet. The Higher Shari’ah Authority is tasked with standardizing Shari’ah requirements and Shari’ah governance in the UAE and serves as the primary reference for Shari’ah rulings related to Islamic financial institutions.

2018

Issuance of Decretal Federal Law No. (14) of 2018, concerning the Central Bank and the organization of Financial Institutions and Activities, which includes several provisions addressing the regulation, licensing, and supervision of Islamic finance and its related activities.

2018

Formal adoption of Shari’ah standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions. (AAOIFI), with the aim of standardizing practices across the UAE, ensuring the stability and growth of Islamic financial institutions, and enhancing the confidence of the stakeholders.

2019

Adoption of prudential standards issued by the Islamic Financial Services Board, in order to align regulatory standards with the nature of the business activities conducted by Islamic financial institutions.

2020

Decretal Federal Law No. (24) of 2020 was issued, transferring the oversight of insurance companies by merging the Insurance Authority with the Central Bank of the UAE.

2022

Decretal Federal Law No. (50) of 2022 was issued, enacting the Commercial Transactions Law. This was the first civil law of its kind regulating Islamic finance transactions. The law helps to create legal certainty by stipulating that the resolutions of the Higher Shari’ah Authority will be the ultimate authority in respect of interpreting matters relating to Islamic finance.

2024

Total value of Islamic financial assets in the UAE surpassed one trillion dirhams.

The Higher Shari’ah Authority

The Higher Shari’ah Authority (“HSA”) was established, and its Members appointed, in accordance with resolutions enacted by the UAE Cabinet. Decretal Federal Law No. (14) of 2018, regarding the Central Bank and organisation of financial institutions and activities and its amendments, reaffirmed HSA’s establishment and provided further details of its mandate. The law includes the obligations and responsibilities of the HSA, which aims to standardize and harmonize practice within the Islamic finance industry, aligning them with internationally- recognized Shari’ah standards and widely-recognized practices through collaboration with relevant stakeholders. The HSA’s goal is to support the creation of a robust infrastructure that enables further development of the UAE’s Islamic finance industry, and advances the UAE’s vision in becoming an internationally-recognized hub for Islamic finance.

Discover More
Islamic Financial Institutions

Islamic Financial Institutions

Takaful Insurance Companies

Takaful Insurance Companies

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The Higher Shari’ah Authority at the CBUAE urges Islamic Financial Institutions to appoint UAE nationals as trainee members in the Internal Shari’ah supervision Committees and requires certain training and development programs for them

24 August 2022


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International Islamic Liquidity Management Corporation’s Governing Board lauds sukuk issues

09 June 2022


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CBUAE Hosted 39th Islamic Financial Services Board (IFSB) Council Meeting and Side Events in Abu Dhabi

17 December 2021


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CBUAE Governor chairs Islamic Finance Services Board Council

09 June 2021


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Central Bank of the UAE hosts Islamic Finance Workshop Towards a Diversified Financial Sector

12 June 2019


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Training in Islamic Finance

10 April 2011


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4th Summit for the Islamic Financial Services Board

05 April 2007

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Last updated on: Thursday 21 May 2026

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