The outlook of Islamic finance in 2025
Feature Highlight
Islamic finance market expected to reach $5 trillion in 2025 – Muhammad Zubair, CEO of AlHuda CIBE.
AlHuda Centre of Islamic Banking and Economics (CIBE) has projected a promising outlook for the Islamic finance industry in 2025, with assets anticipated to surpass the $5 trillion milestone. This forecast underscores the resilience and growing significance of the Islamic finance ecosystem amidst evolving global financial landscapes. Despite a period of slower progress in Islamic microfinance over the last two to three years, 2025 is expected to mark a turning point. Market factors such as rising demand for financial inclusion, sustainable financing, and innovation in Islamic financial products have created a favourable environment for accelerated growth in this segment.
The Islamic finance industry was valued at around $4 trillion as of the end of 2024, across over 80 countries, with a significant portion concentrated in a handful of markets. Analysis of various sources reveals that nearly 95% of the world's Shariah-compliant assets are held by just 10 countries. Leading the market are Saudi Arabia and Iran, each commanding a 25% to 30% share, followed by Malaysia (12%), the UAE (10%), Kuwait and Qatar (5.5%), Türkiye and Bahrain (3.5%), and Indonesia and Pakistan (2%).
Islamic banking assets stand at $2.37 trillion, representing 70.21% of the overall Islamic financial services industry, with the Gulf Cooperation Council (GCC) region leading the way. From 2018 to 2023, the sector recorded a Compound Annual Growth Rate (CAGR) of 10.72%, driven by financing and deposits.
Beyond banking, the global Takaful market is also thriving, with expectations of growth from $33.14 billion in 2024 to $51.75 billion by 2028, reflecting a CAGR of 12.2%. Similarly, the sukuk market has gained remarkable momentum, with global issuance projected to reach $170 billion in 2024 and total outstanding sukuk surpassing $875 billion. ESG sukuk, in particular, continues to attract significant interest, aligning with the growing demand for sustainable financial instruments.
A major driver of growth in 2025 would be the rapid advancement of Islamic fintech. Its market size is projected to grow from $138 billion in 2022/23 to $306 billion by 2027, at an impressive CAGR of 17.3%. The emergence of Islamic environment fintech, which aligns digital innovation with sustainability and Shariah principles, is expected to play a transformative role, further broadening the reach and impact of Islamic finance.
Muhammad Zubair, CEO of AlHuda CIBE, emphasised the bright future of the industry, stating, "Islamic finance has entered a transformative phase, driven by innovation, inclusivity, and sustainability. The $5 trillion milestone in 2025 reflects the sector's critical role in fostering global economic resilience and financial inclusion. Key contributors include the strong growth of Islamic banking in the GCC, the expansion of the sukuk market, and the rise of Islamic fintech, which is shaping the digital and ethical future of finance. At AlHuda CIBE, we are committed to advancing the industry through research, product development, trainings, and partnerships, ensuring that Islamic finance continues to support equitable and sustainable development worldwide."
AlHuda CIBE has been a leader in promoting Islamic finance globally, providing consultancy, Shariah advisory, and capacity-building services in over the globe. Through its initiatives, the organisation has empowered financial institutions to adopt Shariah-compliant frameworks, development innovation and expanding access to ethical financial services. Over the past two decades, the organisation has played a pivotal role in promoting Islamic banking, Takaful, sukuk, and fintech across emerging and developed markets. By organising global forums, providing training programmes, and offering strategic insights, AlHuda CIBE continues to drive innovation and excellence in the Islamic finance industry.
As the Islamic finance industry looks to 2025, AlHuda CIBE reaffirms its commitment to addressing emerging challenges and harnessing opportunities to achieve sustainable growth, particularly in Islamic microfinance and fintech, which are poised for remarkable progress in the coming years.
AlHuda Centre of Islamic Banking and Economics is a global firm providing research, advisory, consulting, and education programmes in Islamic finance.
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