World's Best Islamic Finance - Law of Divine Life

Global Finance’s World’s Best IFI winners highlight how the sector outperformed the sector in 2025 with an emphasis on innovation and AI adoption. But new conflicts in the Middle East create new challenges.

Islamic financial institutions (IFIs) marginally improved their performance in 2025, recording an average return of 2% on average assets and a 12% increase in total assets. This compares to 1.9% and 9% respectively the previous year. All winners of Global Finance’s World’s Best Islamic Financial Institutions awards achieved above-average profitability and growth.

Digitization and AI remain strong areas of focus and investment as IFIs look to drive customer growth, grow financing assets and deposits, and strengthen their competitiveness against traditional banks. Retail banking remains the main pillar of most Islamic banks, but IFIs are also strengthening their commercial banking delivery. Corporate finance, capital markets and wealth management activities are also becoming increasingly important to the sector.

The relatively low cost of funds contributes to the positive margins of Islamic banks. The largest conglomerates, which dominate their home markets, continue to outperform their rivals, reflecting funding advantages and cost efficiency.

The winners of Global Finance’s 2026 World’s Best Islamic Financial Institutions awards have also distinguished themselves as innovative by introducing new Islamic banking products, strengthening their market share, improving service quality and achieving good financial results. Collectively, they have shown themselves to be well managed with clear strategies. However, like all Middle Eastern banks, they face a more challenging road ahead due to new conflicts in the region, particularly the Iran war that has disrupted the Persian Gulf.

This year’s top winner, Kuwait Finance House (KFH), enjoyed asset growth of 17% last year to $139 billion, helping the bank maintain its position as the second largest Islamic institution globally. With operations across the Middle East, Europe and Asia, KFH has the most diverse geographic reach of any IFI. It has advanced its digital transformation by adopting value-driven technology from basic digitization.

Meanwhile, Baubayan Bank claimed Global Finance’s inaugural award as the Most Innovative Islamic Bank. The Bank stands out for its innovation, technology-driven strategy and strong commitment to offering financial solutions that enhance the customer experience. Baubayan made significant progress last year in incorporating AI into the services it offers through its app.

Emirates Islamic Bank (EIB) achieved the title of best Islamic financial institution in the Middle East. The bank reported a 19% rise in net profit last year to $910 million due to strong balance-sheet growth. Lending increased by 26% compared to both retail and corporate banking. Supported by a sophisticated digital offering, the EIB has seen its franchise strengthened through a wide range of Shariah-compliant product offerings.