Beyond oil: Saudi Arabia’s Islamic market pioneers new economic era

• Zeal to diversify from oil resource to tradition-rich Shariah world view market
• Vision 2030 serves as overarching catalyst to remapping Saudi economy
• Big Muslim population, Halal focus and state support underpin national growth

Overview

In the heart of a Kingdom long defined by the vast ebb and flow of oil, the Saudi Shariah market is an economic powerhouse rooted in centuries-old Islamic traditions – while yet propelled by the ambitions of a modernizing state.

As the birthplace of Islam, Saudi Arabia’s mission is not merely to participate in the global Islamic finance market; but aiming to pioneer and command such a position as the world’s largest player in an ethical and faith-based economic sphere.

The market’s remarkable resilience and growth, even through periods of global economic volatility, have been driven by a deeply ingrained system based on Shariah law, which promotes asset-backed financing, risk-sharing and ethical investments.

The surge is inextricably linked to the Kingdom's sweeping economic blueprint of Vision 2030. This ambitious program seeks to fundamentally transform Saudi Arabia's economy by diversifying its revenue streams away from oil.

The Financial Sector Development Program, a key pillar of this vision, is actively reshaping the landscape as the program's objectives are not simply to grow the financial sector but to make it a globally connected, technologically advanced hub that supports a diversified economy and empowers the private sector.

Regulatory framework

Saudi Arabia's Islamic financial infrastructure is governed by SAMA and the Capital Market Authority (CMA). Under their strategic directions, the Saudi capital market has seen a growing pace of Sukuk and debt issuances. These Shariah compliant instruments are seen as a vital mechanism for diversifying funding sources, particularly for the large-scale national projects being developed under Vision 2030.

Authorities are also working to attract a global audience, easing restrictions on foreign ownership within the Kingdom.

Asset spread

The IFN Investor Funds Database lists a thriving Islamic fund management industry in Saudi Arabia with the 317 players sharing a total AuM of US$51.76 billion. There were 29 new funds launched in the year from the 1^st July 2024 to the 30^th June 2025, with total AuM at US$4.06 billion as of the last date.

In Q2 2025, the dominant asset class in the Saudi Shariah space was equities, with AuM of US$15.64 billion across 160 funds.

Money market instruments were the next largest asset class, with an asset base of US$17.69 billion across 36 funds.

Real estate held third position (US$8.2 billion, 28 funds), followed by fixed income (US$4.54 billion, 20 funds), mixed assets (US$4.42 billion, 31 funds), Sukuk (US$763.56 million, 18 funds) and others (US$483.92 million, 20 funds).

Chart: Saudi Islamic market by asset class value and fund count

Fund performance

As per the IFN Investor Funds Database, Saudi Arabia’s largest Islamic fund was Al Rajhi Capital’s Al Rajhi Awaeed Fund, where its AuM stood at just over US$5 billion at the end of Q2 2025.

The SNB Capital-managed SNB Capital Al Sunbullah SAR fund was next, with an AuM of US$4.37 billion, followed by Al Rajhi Capital’s Al Rajhi Growth Fund (US$2.15 billion), Riyad Capital’s Riyad SAR Diversified Trade Fund (US$1.41 billion) and Alpha Capital’s Alpha Murabaha Fund (US$1.4 billion).

Table 1: Largest Islamic funds in Saudi Arabia                        

The best-performing Islamic fund, meanwhile, was Musharaka Capital’s Musharaka Saudi Equity Fund, which according to the IFN Investor Funds Database, had a one-year return of 44.35% at the end of June 2025.

Albilad Capital’s Albilad Gold ETF was second best with a one-year return of 38.49%.

Yaqeen Capital’s Yaqeen Gold Fund came in third with a one-year return of 37.92% while Sedco Capital took the fourth and positions, respectively, with SC China Equity Fund - Class R (32.37%) and SC China Equity Fund - Class D (31.26%).

Table 2: Top performing Islamic funds in Saudi Arabia by one-year return

Outlook

The outlook for Saudi Arabia's Islamic finance market remains positive, underpinned by the country's large Muslim population, its focus on Shariah compliant products and favorable government initiatives.

S&P expects non-oil economic expansion to continue as the Kingdom stays committed to diversifying from its hydrocarbon-dominated economy.

Robust Sukuk issuance and supportive government initiatives are projected to be key drivers of future growth in the industry, S&P adds. 

Moody's, meanwhile, expects strong profitability of Saudi Islamic banks to be a prime catalyst, along with high demand for Shariah compliant products beyond Sukuk.

On the government side, the CMA anticipates the listing of state-owned Islamic companies and assets to add more value to the economy as Vision 2030 becomes a tangible goal that increases investor interest.