Saudi Arabia, Kuwait Drive GCC Islamic Banking Growth

Saudi Arabia and Kuwait remain the Gulf's largest Islamic banking markets, with Islamic lenders accounting for 76% and 51% of banking assets respectively, according to S&P Global Ratings. The UAE's Islamic banks account for 18% of banking assets, S&P said, as robust mortgage and corporate lending continue to fuel growth across the region. The findings come from S&P's latest assessment of Gulf Islamic finance markets, which tracked asset growth across the largest lenders in Saudi Arabia, Kuwait, Bahrain and Oman over the past five years.

Saudi Arabia's Leading Islamic Banks

Saudi Arabia's four largest Islamic banks have more than doubled their combined assets over the past five years, growing 2.1 times compared with 1.8 times for conventional peers. Al Rajhi Bank held $280.1 billion in assets as of March 31, 2026, representing 21.3% of total Saudi banking assets and 28.1% of Islamic assets. Alinma Bank held $86.4 billion, Bank Albilad $48 billion and AlJazira Bank $46.1 billion. The gap between Islamic and conventional asset growth points to sustained demand for Shariah-compliant mortgage and corporate financing products in the Kingdom, supported by continued project activity tied to Saudi Vision 2030.

• Saudi Arabia Islamic banking share: 76% of banking assets
• Kuwait Islamic banking share: 51% of banking assets
• UAE Islamic banking share: 18% of banking assets
• Al Rajhi Bank assets (March 2026): $280.1 billion
• Kuwait Finance House assets: KWD43.555 billion (33% of Kuwait's nine largest banks)

Kuwait's Islamic Banking Landscape

Kuwait Finance House held KWD43.555 billion in assets as of March 31, equivalent to 33% of the assets of Kuwait's nine largest banks. Boubyan Bank held KWD10.358 billion, Warba Bank KWD6.13 billion and Kuwait International Bank KWD4.571 billion. Competition in the market is expected to remain intense following Kuwait Finance House's acquisition of Ahli United Bank Kuwait, a deal that further consolidated the Kuwaiti market around a smaller number of larger Islamic lenders.

Also Read: How First-Time Buyers Can Get a Mortgage in the UAE

Retail Banking Growth Across the Region

Islamic retail banks held $70.3 billion in assets as of March 31, 2026, representing approximately 70% of total retail banking assets in the markets covered. Islamic retail assets grew by an average of 9% to 10% annually over the past five years, exceeding the 5% to 6% growth recorded by conventional retail banks over the same period, a gap S&P attributes partly to deepening consumer preference for Shariah-compliant retail products across the Gulf.

Consolidation Reshaping Bahrain's Market

Consolidation has significantly reshaped Islamic banking in the wider region. Kuwait Finance House acquired Ahli United Bank in 2024, converted it to Islamic banking and rebranded it as KFH Bahrain, now the country's largest retail lender. Al Salam Bank acquired Ithmaar Bank's retail assets in 2022 and the carved-out assets of KFH's previous Bahraini subsidiary in 2024. KFH Bahrain and Al Salam Bank now control approximately 80% of Bahrain's Islamic retail market, leaving the remaining market split among a handful of smaller players.

What's Ahead for the Sector

S&P expects Islamic banking growth to slow in 2026 before recovering in 2027. Islamic banking in Oman represented approximately 19% of banking-system assets at the end of 2025, an increase of roughly 200 basis points over two years. Smaller lenders across the region are expected to focus on technology, customer experience and specialized financing to protect their market positions amid intensifying competition from larger, consolidated players.

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