Islamic finance in Saudi Arabia is considered one of the kingdom’s key economic pillars, reflecting its commitment to Islamic principles in all financial transactions.

This system is based on the principles of partnership, risk-sharing, the avoidance of interest (riba), and a focus on halal investments, making it an ethical and sustainable alternative to conventional finance.

As of 2025, global Islamic finance assets have reached $5.98 trillion, with an annual growth rate of 21%, and Saudi Arabia holds a significant share of this market.

The assets of its Islamic banks amount to approximately $938 billion, with a projected growth rate of 9.3%, supported by Vision 2030.

Today, with growing global interest in Islamic finance, Saudi Arabia has become a worldwide hub for Islamic financial services. It contributes to financing major projects such as NEOM and the Red Sea Development and works to attract foreign investments.

This article will cover the sector’s expansion history, regulatory framework, current status with detailed statistics, key institutions, and recent developments, including sukuk, digital finance, and the challenges facing financing operations.

The history of Islamic finance dates back to the 1950s, when it began as a simple commercial activity based on Sharia principles.

Al Rajhi was established in 1957 as a currency exchange business, and later transformed into a fully fledged Islamic bank in 1983, becoming the largest bank in the region.

In the 197s, the Islamic Development Bank (IsDB) was founded in Jeddah in 1974, contributing to the global advancement of Islamic finance by funding development projects in Muslim countries.

During the 1980s, the Saudi Organization for Certified Public Accountants introduced Sharia-based standards, helping banks better understand Islamic finance operations.

By the early 1990s, the sector began to experience rapid growth driven by rising oil prices, with Saudi Arabia’s share reaching 25% of global Islamic finance assets by the year 2000.

In the first decade of the 21st century, the support of King Abdullah led to an expansion in sukuk and investment funds.

Today, Islamic finance accounts for more than 85% of banking activity in the Kingdom, supported by the digital and sustainability-focused transformation under Saudi Vision 2030.

Major institutions and companies

Saudi Arabia is home to some of the world’s largest Islamic banks, holding top global rankings. Among the most prominent are:

1. Al Rajhi Bank
The largest Islamic bank globally, with assets exceeding USD 200 billion.
It controls around 40% of the local market and stands out in digital financing and sukuk.

2. Alinma Bank
The fourth-largest Islamic bank worldwide, with assets of USD 74 billion.
It focuses on innovation and digital services and is considered one of the newest Saudi banks.

3. Saudi National Bank (SNB)
Provides a wide range of Islamic banking services.
It is one of the leading banks in issuing green sukuk.

4. Riyad Bank
A bank specialized in corporate financing and major project funding.

The regulatory framework for finance

Recent Developments

In recent periods, the Saudi market has witnessed strong demand for sukuk, with global issuances surpassing USD 1 trillion, driven by 15.5% growth and expectations of around USD 190–200 billion.
The Islamic Development Bank also issued green sukuk worth EUR 500 million.

Moreover, banks are moving toward sustainable digital financing supported by standards aimed at funding environmental projects. Loan growth has increased by 15.6%, driven by the non-oil sector.

Challenges Facing the Sector

The sector faces many challenges that may pose obstacles, including:

• Product diversification

• Coping with the global recession

• Addressing the shortage of human talent

• Compliance with international standards

Microfinance requires innovative solutions to reach low-income groups,
in addition to dealing with digital challenges and the lack of public awareness about them.

In conclusion

it should be noted that Islamic finance represents a prominent model for harmonizing Sharia principles with modern economic developments.

It has contributed to strengthening financial stability and supporting sustainable development through the robust regulatory framework provided by the Saudi Monetary Authority.

Moreover, innovation in tools such as sukuk and Islamic banks has begun, making this sector a key driver of economic growth, particularly within the framework of Vision 2030, which aims for economic diversification beyond oil.

Today, with the increasing global interest in financing all types of projects, Islamic finance in Saudi Arabia is expected to continue expanding, enhancing the Kingdom’s position as a leading Islamic financial center internationally and opening new avenues for investment and international partnerships.

The continued commitment to Islamic principles, coupled with innovation, will help ensure a prosperous future for the sector, benefiting both the economy and society as a whole.

Therefore, Islamic finance in the Kingdom represents a model that successfully combines Sharia compliance with economic efficiency.