Global Islamic finance assets crossed US$5.98 trillion in 2024, growing 21% year-on-year, according to the ICD-LSEG Islamic Finance Development Report 2025.

But the digital infrastructure underpinning the world’s fastest-expanding faith-based financial system is straining to keep up, and nowhere is that gap more visible than in the GCC.

The region holds roughly half of all global Islamic finance assets, and the UAE alone is targeting AED 2.56 trillion in Islamic banking assets by 2031.

Customers here rank among the world’s most digitally sophisticated: only one in six purchases in the UAE is now made in cash, and Dubai’s cashless strategy targets more than 90% of all transactions going digital by 2026.

That customer expectation collides with a hard architectural reality. Sharia-compliant banking cannot be delivered on infrastructure designed for conventional finance; yet many Islamic banks are still trying.

As one recent industry assessment put it, the real battle for market leadership is being fought in the back office, through the modernisation of the core systems that determine which products a bank can actually launch.

For Islamic banks accelerating their digital transformation, three structural challenges keep surfacing.

Sharia complexity at digital speed

Islamic banking products are not just relabelled conventional ones. A Murabaha transaction must follow a rigid sequence: offer, acceptance, purchase, sale, delivery and if system logs show the purchase occurring before acceptance, the contract is religiously invalid.

Ijara requires the platform to manage the full lifecycle of asset ownership, lease payments, and final transfer of title. Wakala, Salam, Istisna and Takaful each impose their own contract state machines.

Generic core banking systems were not built for this. Workarounds increase operational cost, raise the risk that products are challenged by Sharia boards after launch, and slow every release cycle.

The cost of getting it wrong is not a regulatory fine, it is religious invalidity, which carries direct reputational consequences in markets where trust is the franchise.

The product-innovation lag

Conventional banks have spent the last decade compressing time-to-market from years to weeks. Most Islamic banks have not.

The Islamic finance industry is forecast to grow from US$5.4 trillion to US$9.75 trillion by 2029, but a significant share of that growth will be captured by institutions (Islamic or conventional) that can launch new Sharia-compliant products at digital cadence.

Mobile Hajj-saving wallets, Sharia-compliant BNPL built on Murabaha or Ijara structures, robo-advisers that screen out non-permissible sectors, digital Sukuk distribution; these are no longer experimental. They are becoming table-stakes products in a market growing in double digits.

The talent equation

The talent gap in Islamic finance is not improving, it is widening. Professionals holding AAOIFI Shariah qualifications or dual regulatory licenses have commanded year-on-year compensation increases of 18% to 25% through 2024 and 2025, with signing bonuses equivalent to six months’ salary in some GCC markets.

Senior Shariah governance positions have remained unfilled for 9 to 14 months in documented cases. Banks cannot hire their way out of a knowledge supply the global pipeline has not yet produced at scale.

The implication is unavoidable: scarce Sharia expertise has to be amplified through technology, embedded in product workflows, audit trails and automated compliance checks rather than consumed in manual, case-by-case review.

An architectural answer

What ties these three challenges together is an architectural problem. Legacy core banking systems were never designed for the contract logic, audit requirements and product velocity that modern Islamic banking demands.

Replacing the core, however, is rarely the right answer for a tier-1 bank: too risky, too long, too disruptive to live operations.

This is where an orchestration layer above the core comes in. Finshape, a leading provider of digital banking solutions, has built one. Its Agentic Digital Bank Operating System (ADBOS) is built on AI agents that automate and orchestrate banking processes end to end.

Rather than ripping out legacy infrastructure, ADBOS sits above it, configures Sharia-compliant products natively (Murabaha, Wakala, Salam, Takaful among them), and lets business teams launch new financing journeys in weeks instead of years. Sharia governance, compliance and audit trails are built into the workflow, not bolted on afterwards.

“The innovation layer has moved,”

says Neil Budd, CEO of Finshape.

 

“It is no longer happening in the core banking system. For Islamic banks, that shift is even more pronounced, they need the speed of digital natives without compromising on the compliance, ethics and governance that define their franchise. Sovereignty over their digital roadmap is what gets them there.”

Islamic banking’s growth story is intact.

The harder question is who captures it. Banks that pair strong Shariah governance with modern, orchestration-first digital architecture will set the standard for the next decade of faith-based finance in the GCC and beyond.

Featured image credit: Edited by Fintech News UAE, based on image by Finshape