Despite a challenging economic climate defined by geopolitical instability and rising funding costs, Moody’s Ratings projects that Islamic banks in the Gulf Cooperation Council (GCC) will continue to outpace their conventional counterparts. These Shariah-compliant institutions are expected to sustain faster growth rates and superior profitability, driven by consistently high demand for ethical financial products and a strategic focus on the public sector. By maintaining lower credit costs and stronger net interest margins, Islamic lenders are well-positioned to navigate the projected slowdown in non-oil economic growth expected in 2026.

A primary advantage for these banks remains their superior asset quality, bolstered by a significant concentration of government-related lending and salary-backed financing. With non-performing financing ratios significantly lower than those of conventional peers, Islamic banks are better equipped to withstand market volatility. Furthermore, their access to stable retail deposits and robust capital buffers provides a solid foundation for growth. As regional governments continue to develop the sukuk market and deepen Shariah-compliant financial infrastructure, Islamic banks are expected to solidify their dominant market share in key hubs like the UAE and Saudi Arabia, ensuring long-term resilience and sustained investor confidence.