The MENA region is forecast to contract by 0.5% this year, while Saudi is projected to grow 1.1% in 2026 and 5.5% in 2027, as a result of diversified export routes, the International Monetary Fund said earlier this month. Iran’s 2026 growth projection has been revised upward by 0.7 percentage point from the fund’s April estimate, to –5.4%.
The average Tier 1 capital ratio for the top 50 banks in the region was about 17% at the end of March 2026, according to the S&P study. The UAE Central Bank requires banks to maintain a minimum Tier 1 capital of 8.6% of risk-weighted assets.
“We are united on one fundamental objective: protecting Pakistanis from fraud, exploitation, and financial harm,” Saqib, who chairs the Virtual Assets Regulatory Authority, wrote on social media platform X.
Pakistan passed a bill earlier this year to establish a specialised authority to license and regulate digital assets in the country.
Ashar Nazim, managing director of Aion Digital said that the reasoning underneath the ruling is not built on volatility or speculation, which is the argument you usually hear.
"It rests on a much older question. Does crypto even qualify as maal, as property, under Islamic law. The ruling says no. It calls it a record of notional numbers in an account. Not something you can own in the classical sense, Nazim wrote in a LinkedIn post.
"What I found genuinely telling is that this is not settled. Pakistan's own virtual assets regulator asked for continued dialogue. Doctrinal questions like this move slower than product roadmaps, and faster than most institutions plan for. If your business touches anything crypto adjacent in an Islamic finance market, this is worth us discussing."
The central bank announced a support package for banks on March 17, under which lenders were permitted to access reserve balances of up to 30% of the cash reserve requirement and availability of term liquidity facilities in dirham and dollar denominations. Lenders could delay the classification of affected customer loans as non-performing. Loan deferrals under the scheme reached $1.68 billion, with support extended to more than 60,000 individuals, 4,335 SMEs and 485 corporates.
Major Islamic finance markets are using policy reforms, new institutions, and capital market tools to strengthen their Islamic finance systems this year.
Multilateral institutions are also playing an important role in the Islamic finance ecosystem by setting standards, providing financing, and helping countries build the legal and technical foundations for growth.
One of the most consequential developments in 2025 was the strategic pause in the implementation of AAOIFI Shariah Standard 62 on Sukuk.
Targeted sukuk, government programs, and structured social finance initiatives are helping direct capital toward development goals.
Early-stage and growth capital continued to flow into Islamic fintech, consumer finance, and platform-based business models, supporting the development of new financial products and services that serve the broader Islamic economy.
Fintech activity in Islamic finance focused on regulated growth this year. Key themes include new licensing frameworks, sandbox approvals, digital bank launches, and clearer rules for digital assets.
Islamic social finance, including waqf, Zakat, and microfinance, is moving from informal charity to structured programs with clearer governance and delivery models. These tools connect Islamic finance to social development goals and can mobilise resources that sit outside the formal banking system.
Innovation in Islamic finance is shifting from one-off pilot projects to market-ready structures and rules that can
be repeated and scaled. These innovations often connect Islamic finance to other sectors, such as real estate
and trade, by creating new ways to structure compliant investment products.
Meanwhile, social impact is becoming a more visible part of Islamic finance.
Qatar also introduced a slew of measures to underpin its banking sector, including unlimited repurchase facilities in local currencies against securities held by lenders, as well as a term repo facility with three-month maturities.
Sukuk issuances by the six Gulf states increased 13.1% year-on-year in the first four months of 2026, underpinned by local currency issuance in Saudi Arabia.
Saudi Arabia has expedited debt issuance as contends with lower oil receipts and funding requirements for its Vision 2030 projects. The kingdom raised $644 million (2.42 billion Saudi riyals) through its May sukuk issuance, scaling back monumentally from 16.946 billion Saudi riyals raised in April.
Global sukuk issuance also rose by 20% from January through April this year, with contributions from Malaysia, Türkiye, and Indonesia, the agency said.
“The resolution of the Middle East war will determine whether or not this trend continues, as the GCC accounted for 45% of global sukuk issuance in 2025,” added Mohamed Damak, Head of Islamic Finance at S&P Global Ratings.
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