DNA
The global Islamic finance industry has steadily evolved from a niche, alternative financial system into a systemically important component of the international financial architecture. Grounded in Shariah principles that emphasise risk sharing, asset-backed transactions, and social justice, Islamic finance today represents a diversified ecosystem encompassing banking, capital markets, insurance (takaful), FinTech, and social finance instruments. Its expansion has been propelled not only by the demographic momentum of a global Muslim population exceeding two billion, representing more than 25% of the world’s population, but also by rising interest from non-Muslim markets seeking ethical, resilient, and values-based financial solutions. In recent years, Islamic finance has demonstrated a notable capacity to sustain growth despite global macroeconomic tightening, elevated inflation, geopolitical disruptions, and financial market volatility, reinforcing its growing relevance within the global financial system.
As of the most recent industry assessments, total global Islamic finance assets reached at 5.2 trillion USD and continue to expand at a pace that compares favorably with, and in some cases exceeds, the conventional financial sector growth average pace. According to international standard-setting and industry monitoring institutions, global Islamic finance assets grew by approximately 14.9% year-on-year in 2025, reaching nearly USD 5.2 trillion, compared to average single-digit growth in many conventional banking markets. Forward-looking projections suggest that total assets are on track to cross USD 6 trillion by the end of 2026, supported by strong balance-sheet expansion in Islamic banking, accelerating Sukuk issuance volumes, and the rapid digitalization of Shariah-compliant financial services. The Islamic Financial Services Industry entered 2025 with renewed momentum, recording double-digit growth across its core sectors and benefiting from regulatory reforms, stronger prudential oversight, and the gradual opening of new jurisdictions, particularly across Africa and selected European markets. This sustained performance underscores the intrinsic resilience of Islamic finance, derived from its close linkage to the real economy and its structural avoidance of excessive leverage, speculation, and interest-based transactions.
Despite this positive trajectory, the structure of the Islamic finance industry remains highly concentrated. Islamic banking continues to dominate the landscape, accounting for approximately 72% of total industry assets, equivalent to more than USD 2.7 trillion globally. While this dominance provides scale and systemic depth, it also highlights persistent structural imbalances. Sukuk represents the second-largest segment, with an estimated share of 18% depending on classification, corresponding to more than USD 900 billion in outstanding value globally. Sukuk has become a critical funding and liquidity management instrument for sovereigns and corporations, particularly in the Gulf Cooperation Council and Southeast Asia. Islamic FinTech, although still modest in absolute terms, accounts for roughly 3% of industry activity and has emerged as the fastest-growing subsector, with annual growth rates consistently exceeding those of traditional Islamic finance segments. Islamic capital markets beyond Sukuk, including Islamic funds, asset management, pension funds, and Islamic REITs, collectively represent around 3% of total assets, while Takaful and Islamic microfinance and social finance each contribute approximately 2%. The remaining 1% comprises miscellaneous activities such as Islamic leasing entities and Mudarabah-based investment pools as illustrated in the below chart. This composition illustrates both the strength and vulnerability of the industry: while banking provides stability and scale, excessive reliance on a single segment limits diversification, constrains liquidity management options, and exposes the system to concentration risks over the long term.
Industry performance during 2025 reflected both continuity and transition. Islamic banking remained the backbone of the system, supported by steady financing growth of over 17% year-on-year and sustained deposit expansion approaching 9% globally. Several African jurisdictions recorded compound annual growth rates well above the global average, in some cases exceeding 20%, signaling a gradual but meaningful geographical rebalancing of Islamic banking activity. At the same time, structural challenges persisted, most notably the limited availability of Shariah-compliant liquidity instruments and the continued dependence of Islamic banks on sovereign Sukuk for liquidity and balance-sheet management. International regulators and standard-setting bodies have increasingly stressed that without deeper and more liquid Islamic capital markets, banking-led growth alone may not be sufficient to ensure long-term financial resilience.
The Sukuk market emerged as one of the most dynamic segments of the industry during 2025. Global Sukuk issuance rose sharply, with total issuance volumes exceeding USD 230 billion in 2024, reflecting annual growth of more than 25%. This momentum carried into 2025, driven by sovereign funding needs, infrastructure investment requirements, and growing corporate participation. Importantly, new Sukuk markets emerged in Tanzania, Zambia, and Kenya, marking a significant milestone in Africa’s integration into global Islamic capital markets. These issuances underscore increasing confidence among African policymakers in Sukuk as a tool for infrastructure financing, fiscal diversification, and capital market development. However, despite strong primary market performance, Sukuk markets continue to face structural limitations, including shallow secondary market liquidity, limited benchmark yield curves, and a relatively concentrated investor base dominated by buy-and-hold institutions. Addressing these challenges remains essential if Sukuk is to function more effectively as a liquidity management, pricing, and risk-management instrument within the global financial system.
Beyond Sukuk, Islamic capital markets recorded moderate but uneven growth. Islamic funds and asset management benefited from improved global equity market conditions and growing investor interest in sustainability-linked investments. Nevertheless, the sector remains fragmented, with a large number of small-scale funds limiting economies of scale and cross-border competitiveness. Sustainability-themed Islamic funds and green Sukuk gained visibility during 2025, aligning Islamic finance more closely with global ESG trends, yet they still account for a relatively small proportion of total market activity, highlighting considerable untapped potential.
The takaful sector experienced steady growth during 2025, with global takaful assets expanding at an estimated rate of 15–17% annually. Markets in the Gulf Cooperation Council and Southeast Asia continued to dominate, supported by stronger regulatory frameworks, higher insurance penetration, and more developed investment markets. In contrast, Takaful development in Africa and Central Asia remains constrained by regulatory capacity gaps, limited re-takaful availability, and shallow domestic capital markets. Strengthening institutional frameworks and expanding Shariah-compliant investment avenues will be critical to sustaining Takaful growth beyond core markets.
Among all subsectors, Islamic FinTech stands out as the most rapidly expanding and strategically transformative. According to the State of the Global Islamic Economy Report 2024/25, Islamic FinTech growth has consistently outpaced most traditional Islamic finance segments, supported by digital payments, Shariah-compliant buy-now-pay-later solutions, embedded finance, and the application of artificial intelligence and blockchain technologies to enhance transparency, compliance, and operational efficiency. Several Islamic FinTech platforms have achieved regional scale, while transaction volumes in Islamic digital finance have grown at double-digit rates annually. These platforms increasingly target underbanked and unbanked populations, particularly across Africa and South Asia, positioning Islamic FinTech as a critical driver of financial inclusion and market expansion. Although Islamic FinTech currently represents a small share of total industry assets, its strategic significance far exceeds its size and is expected to increase materially by 2026.
Geographically, Asia continues to dominate the global Islamic finance landscape, accounting for more than 50% of global Islamic finance assets when combined with GCC markets, led by Malaysia, Indonesia, Pakistan, and the Gulf economies. However, this dominance is expected to gradually diminish as Africa and Western markets attract a growing share of capital flows. Africa has emerged as the most promising frontier for Islamic finance expansion, supported by favorable demographics, infrastructure financing needs, and increasing regulatory openness. In addition to Sukuk issuances in East and Southern Africa, Islamic banking has begun to take root in countries such as Eswatini, Zimbabwe, Ghana, and Uganda. Looking ahead to 2026, new African entrants are expected to include Ethiopia, Ghana, Uganda, and Somalia or Somaliland, reflecting rising demand for Shariah-compliant financial services and broader financial inclusion objectives.
Europe is also moving from cautious experimentation toward more structured engagement with Islamic finance. The anticipated entry of Italy, Switzerland, Portugal, and the Netherlands into Islamic banking and capital market frameworks signals growing recognition of Islamic finance as a credible component of ethical and sustainable finance strategies. While not all of these jurisdictions are expected to operationalize Islamic finance simultaneously, at least two European markets are likely to emerge as active participants by 2026. Albania has already established itself as a functioning Islamic banking market, further reinforcing Europe’s gradual integration into the global Islamic finance ecosystem.
The year 2026 presents a wide range of strategic opportunities for the Islamic finance industry. Deepening Islamic capital markets remains a central priority, particularly through the development of liquid Sukuk secondary markets and more standardized issuance structures that support price discovery and broader investor participation. Islamic FinTech offers strong potential for cross-border scaling, cost reduction, and inclusion-driven growth, especially when supported by regulatory sandboxes and greater international harmonization. Africa-focused Islamic infrastructure finance, particularly Sukuk-backed projects in energy, transport, and agriculture, represents another high-impact opportunity. At the same time, the growing convergence between Islamic finance and ESG principles positions the industry favorably within global sustainability and climate-finance agendas.
