Islamic finance market to be valued at $7.7t in 2033

The global market was $2.5t in 2023, according to Allied Market Research.

The Islamic finance market is set to reach $7.7t in 2033, or a compound annual growth rate (CAGR) of 12% over the 10-year period, according to a report by Allied Market Research.

The global market was valued at $2.5t in 2023, it said.

The rapid shift towards cashless transactions and digital banking has propelled the growth of the Islamic finance market.

Factors such as real-time payment systems, AI-driven fraud detection, and increase in consumer preference are driving the market, Allied Market Research said.

“By emphasizing risk-sharing models and providing alternatives to interest-based lending, Islamic financial institutions have been successful in reaching underserved populations, particularly in developing economies,” said Allied Market Research.

Guided by Shariah law, the Islamic finance market prohibits interest (riba), high uncertainty (gharar), and gambling-like activities (maysir). Instead, it encourages profit-sharing, asset-backed financing, and investments that support real economic growth, the research said.

Many governments— especially Muslim-majority countries and key financial hubs— now also actively promote Islamic finance through favorable policies, regulatory reforms, and strategic initiatives.

“By establishing clear legal frameworks that align with Sharia principles, governments create a secure environment that encourages financial institutions to offer Islamic banking, investment, and insurance products,” it said.

Challenges include lack of standardization and regulatory harmonization, and complex product structuring. To mitigate these risks, financial institutions are focusing on AI-powered fraud prevention and blockchain-based secure transactions.