Saudi Arabia has turned into one of the main hubs for developing the Islamic Finance Services Industry (IFSI) in the last decade. In the early stages of the development of Islamic products and services, Saudi Arabia was a key participant because of its unique place in the Muslim world. Indeed, one of the most famous Islamic Financial institutions, the Islamic Development Bank (IsDB), is also located in Jeddah, Saudi Arabia.
Saudi Arabia is currently home to more than a quarter of the GCC’s Islamic financial assets. According to the data at the beginning of 2020, total Islamic finance assets in Saudi Arabia exceeded $339 billion, leaving Malaysia in second place with around $145 billion.
| Total Financial Assets | Islamic Financial Assets | ||||
| Assets | SAR (Billion) | US$ (Billion) | Percentage | SAR (Billion) | US$ (Billion) |
| Banking Assets | 2,363,4 | 630.2 | 64.9% | 1,533.8 | 409.0 |
| Equity Market | 1,858.8 | 495.7 | 67.2% | 1,248.8 | 333.0 |
| Sukuk Outstanding | 369.8 | 98.6 | 100.0% | 369.8 | 98.6 |
| Assets Under Management | 111.9 | 29.8 | 80.0% | 71.6 | 19.1 |
| Insurance | 58.5 | 15.6 | 100.0% | 58.5 | 15.6 |
| Finance Companies | 14.4 | 3.8 | 100.0% | 14.4 | 3.8 |
| Total | 4,776.8 | 1,273.8 | 3,297.0 | 879.2 |
The following table illustrates total and Islamic Financial assets distribution in Saudi Arabia in 2018.
Islamic Banking In Saudi Arabia
In fact, Saudi Arabia’s banking sector consists of 12 domestic and 13 foreign commercial banks. Four of 12 domestic banks operate as full-fledged Islamic banks, they are:
1- Al-Rajhi Bank Saudi Arabia
2- Al-Bilad Bank
3- Al Jazeera Bank
4- Alinma Bank
Additionally, all other conventional banks have Islamic windows. In 2018, the top four Islamic banks comprised more than 40% of total Islamic banking assets. Moreover, Saudi Arabia has the most prominent Islamic banking industry in the GCC in terms of its asset size with around US$ 409 billion.
Additionally, the three largest banks, the National Commercial Bank, Al Rajhi Bank, and SABB, lead the banking industry accounting for 47.8% of total assets. Among these three banks, particularly Al Rajhi Bank is the only bank that offers fully-fledged Islamic banking services.
Indeed, almost all banks in Saudi Arabia have already started using digital banking solutions to meet customer needs. Saudi banks support the fintech sector through a variety of initiatives such as online payment services.
Sukuk And Islamic Insurance
Recently, Sharīʿah-compliant products, especially Sukuk and Islamic insurance, have become significant contributors to the growth of the Islamic finance sector. In addition, the country issued its first and largest government, ṣukūk, worth SAR 15 billion (USD $4 billion) in January 2012. As soon as Saudi Arabia started to give Sukuk, soon in the second quarter of 2012, it became the second-largest Sukuk issuer globally, behind Malaysia. Moreover, in 2017, the kingdom issued international ṣukūk worth USD $9 billion and brought the market to a new level. So far, the issuance of government ṣukūk has dominated its local ṣukūk market.
As a matter of fact, there are three major Islamic insurance markets, Saudi Arabia, Malaysia, and the UAE, and they account for over 87% of total contributions in 2017. Meanwhile, Saudi Arabia Kingdom is considered to be the second-largest insurance issuer after UAE in the MENA region.
In conclusion, Saudi Arabia’s Islamic finance sector contributes significantly to the country’s economic growth in different ways.
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