- Fitch classified the outlook for the Islamic banking sector across Europe, the Middle East and Africa (EMEA) as “neutral” for 2026, citing resilient economic conditions across key markets.
- Kuwaiti Islamic banks hold the highest weighted-average IDR at ‘A’, placing them on par with peers in the UAE, Saudi Arabia, Qatar, and the UK.
- The agency expects Islamic banks to continue benefiting from solid liquidity, healthy profitability, adequate capital buffers, and stable asset quality.
- Across the GCC, Jordan, Iraq, and Turkey, the share of Islamic banks in total sector assets ranges between 9% and 85%, with growth expected to outpace that of conventional banks through 2026.
Fitch Ratings has reaffirmed Kuwait’s leading position in Islamic finance, ranking the country second regionally in terms of Islamic banking market share.
According to the agency’s latest report, Sharia-compliant banking assets accounted for approximately 40% to 50% of Kuwait’s total domestic banking assets by the end of 2024.
The report highlights that Islamic banking represents a substantial and highly influential pillar of Kuwait’s financial system, reflecting the deep penetration and broad acceptance of Islamic finance products in the local market.
This scale underscores the sector’s strong asset base and its systemic importance to the national economy, placing Kuwait among the top markets in the Middle East and North Africa, second only to Saudi Arabia in asset concentration, reports Al-Rai daily.
Fitch classified the outlook for the Islamic banking sector across Europe, the Middle East and Africa (EMEA) as “neutral” for 2026, citing resilient economic conditions across key markets.
The agency expects Islamic banks to continue benefiting from solid liquidity, healthy profitability, adequate capital buffers, and stable asset quality.
While credit growth in major Islamic banking markets—particularly Saudi Arabia and the UAE—is expected to remain strong, Fitch noted that growth rates are likely to moderate compared with the exceptional levels recorded in 2025. Sukuk issuance is also forecast to remain robust, although volumes may ease slightly from last year’s peak.
Across the GCC, Jordan, Iraq, and Turkey, the share of Islamic banks in total sector assets ranges between 9% and 85%, with growth expected to outpace that of conventional banks through 2026.
Fitch attributed this trend to strong public confidence in Sharia principles, supportive regulatory frameworks, and the maturity of Islamic banking ecosystems in these markets. In countries where market penetration remains lower, governments are increasingly adopting strategies to strengthen the sector.
The agency further noted that nearly two-thirds of Islamic banks rated by Fitch in the EMEA region carry investment-grade Issuer Default Ratings. This reflects a combination of sovereign support, strong standalone credit profiles, and shareholder backing.
Notably, Kuwaiti Islamic banks hold the highest weighted-average IDR at ‘A’, placing them on par with peers in the UAE, Saudi Arabia, Qatar, and the UK.
Fitch also pointed out that Islamic finance markets dominated emerging-market dollar bond issuance in 2025, with Gulf countries and Turkey playing a central role. Sukuk featured prominently, particularly in Saudi Arabia, where secondary issuances rose sharply.
This momentum is expected to extend into 2026, supported by sustained financing needs and a solid growth outlook.
On liquidity management, Fitch observed continued progress in developing Islamic liquidity tools across the EMEA region, especially in the Gulf.
However, differences in Sharia interpretations, regulatory frameworks, and market maturity continue to create uneven development compared with conventional banking. While emerging technologies could enhance transparency and settlement efficiency, their adoption remains at an early stage.
Looking ahead, Fitch expects further consolidation in the sector, alongside the launch of new Islamic digital banks.
Recent entrants such as TAM in Kuwait, D360 and Vision in Saudi Arabia, and NOMO in the UK illustrate how digitalization is reshaping Islamic banking by improving efficiency, expanding reach, and supporting growth.
The agency anticipates additional mergers and acquisitions as banks seek to strengthen their market positions and address structural challenges.
