Moody’s forecasts Islamic finance to outpace conventional banking in GCC

Moody's Ratings has forecast that the profitability of Islamic banks in Gulf Cooperation Council (GCC) countries will remain strong over the next 12 to 18 months.

In its report today, the agency attributed the strong profitability of Gulf Islamic banks to robust commercial activity driven by government efforts to diversify economies across the GCC.

The report noted that Islamic financing will continue to outperform its conventional counterpart, with increasing demand for Sharia-compliant products. It also predicted further growth through mergers, as the sector seeks to enhance revenue generation and reduce costs.

Moody’s highlighted that Islamic banks in GCC countries will continue to maintain strong capital and liquidity, enabling them to capitalise on the growing demand for Sharia-compliant financial services in the Gulf region.

The agency expects non-oil economic growth in GCC countries to remain strong in 2025, thanks to ambitious government economic diversification plans and strong business confidence.

Badis Shubailat, Assistant Vice President and Analyst at Moody’s, said that sustained economic growth, government commitment to bolstering the broader Islamic finance industry, and increasing demand for Sharia-compliant products in the GCC region will continue to drive Islamic finance growth, which will outpace its conventional peers.