UAE Islamic banking assets jump 11%
UAE Islamic banks saw their asset values rise to Dh703 billion by the end of 2023, recording an 11 per cent annual increase as total assets of the country's banking sector exceeded Dh4 trillion, Central Bank of the UAE data showed.
Figures released by the apex bank revealed this was a jump from Dh630.7 billion in December 2022, marking a growth of Dh72.4 billion over 12 months, reinforcing the second largest Arab economy as the booming Islamic finance market. On a month-onmonth basis, assets increased by 0.6 per cent in December, totaling Dh4.2 billion compared to November's Dh698.8 billion.
According to Khaled Mohamed Balama, governor of CBUAE, the development of the Islamic finance sector is instrumental for the UAE'S sustainable growth and its achievement of sustainable development goals.
The Islamic banking sector has become an integral part of the UAE'S financial industry, accounting for 23 per cent of total banking assets within the UAE in 2022. Meanwhile, Islamic windows, in addition to the takaful market and sukuk issuances, account for 25 per cent of total Islamic banking assets in the UAE, equivalent to Dh 214 billion.
“Islamic banks play a crucial role in the development and provision of sustainable finance and in meeting the sustainability objectives of the wider financial sector, in accordance with the UAE'S regulatory, supervisory and risk management directives. This is further strengthened by the issuance of the Guiding Principles Regarding Sustainability in Islamic Financial Institutions by the Higher Shariah Authority,” Balama has said in a report.
The report also presents key statistics and indicators regarding the UAE'S Islamic finance landscape. Chief among these is the presence of eight standalone Islamic banks, 16 Islamic banking windows of conventional banks, and nine Islamic finance companies operating in the UAE. The report also highlights the presence of 10 takaful insurance companies with total gross written contributions amounting to Dh4 billion in 2022, whereas the value of sukuk outstanding stood at Dh217 billion in H1 2023.
Islamic banks follow Shariah principles, providing diverse financial services, including investments, and deposits, avoiding interest-based transactions, and upholding ethical standards.
CBUAE has issued licences to several fully fledged Islamic banks, including Abu Dhabi Islamic Bank, Ajman Bank, and Al Hilal Bank.
Additionally, BOK International Bank, Dubai Islamic Bank, Emirates Islamic Bank, and Sharjah Islamic Bank have also received licences to operate in this sector.
According to CBUAE'S data, credit extended by Islamic banks rose to Dh428.9 billion by December, up 7.82 per cent annually from Dh397.8 billion. Meanwhile, deposits in such institutions witnessed a surge, reaching Dh495.3 billion by the end of 2023, reflecting a yearly growth of about 12.6 per cent from Dh439.8 billion in December 2022.
On a monthly basis, deposits increased by 0.9 per cent compared to November 2023's Dh491.1 billion.
These banks saw their total investments reach Dh132.7 billion by December, marking a 27.1 per cent, or Dh28.3 billion annual increase, while monthly investments rose by about 1.0 per cent.
The breakdown of these investments includes Dh100.4 billion in bonds held to maturity, Dh18.7 billion in financial instruments representing debt on others, and Dh2.6 billion in shares. This also encompasses Dh11 billion in other investments within the portfolio.
In comparison, traditional banks operating in the UAE witnessed substantial growth in their total assets, reaching Dh3.3 trillion by the end of last year. This marked an 11 per cent annual increase from Dh3 trillion, reflecting a rise of Dh335.2 billion over the year. By December, conventional banks comprised roughly 82.7 per cent of the total assets of the country's banking system, totaling Dh4 trillion, whereas Islamic banks held a 17.3 per cent share.
Conventional banks extended a total credit of Dh1.5 trillion by December, marking a 5.5 per cent yearly increase, while deposits surged to Dh2 trillion.
The total investments of conventional banks grew by 15.6 per cent annually to Dh488.8 billion by December. This included Dh246.2 billion in financial instruments representing debt on others, Dh204.4 billion in bonds held to maturity, Dh13.2 billion in shares, and Dh37.9 billion in other investments.