Saudi Arabia’s conventional banks recorded a notable increase in their Islamic lending portfolios during 2025, continuing a trend that has defined the Kingdom’s financial sector for more than a decade. The growth reflects both rising consumer and corporate demand for Sharia-compliant products and a deliberate strategic shift among Saudi lenders toward expanding their Islamic financing offerings.
Islamic Loans Expand Across the Conventional Banking Sector
Argaam’s analysis of the full-year 2025 results for Saudi conventional banks shows a measurable rise in Sharia-compliant financing facilities, building on a consistent decade-long trajectory. Saudi Arabia’s Islamic banking assets now stand at approximately $938 billion, and the Kingdom holds a significant share of the global Islamic finance market, which itself reached $5.98 trillion in 2025 — growing at an annual rate of around 21 percent. The strength of these figures positions Saudi Arabia as one of the most important centres of Islamic finance globally, alongside Malaysia and the broader Gulf region.
Mega-Projects Fuelling Demand for Sharia-Compliant Finance
A significant share of the demand for Islamic lending has been driven by the financing requirements of Saudi Arabia’s largest infrastructure and development programmes. The Public Investment Fund raised $7 billion through Murabaha and Tawarruq-structured facilities in early 2025, underscoring the scale at which Islamic instruments are being deployed to fund Vision 2030 ambitions. Flagship projects including NEOM and Red Sea Global rely heavily on Islamic financing structures for their capital needs, creating a consistent pipeline of large-ticket Sharia-compliant transactions that benefit the entire banking sector.
A Structural Shift in Saudi Banking
The steady increase in Islamic loans within conventional bank portfolios is not incidental — it reflects a structural realignment that has accelerated in recent years as Saudi lenders compete more directly with fully Islamic banks such as Al Rajhi and Bank AlBilad. With SAMA’s continued support for a regulatory environment that enables both Islamic and conventional banking to thrive, Saudi Arabia’s financial sector is well positioned to sustain its role as a global leader in Sharia-compliant finance well into the next decade.
