Islamic finance is today a $3.9 trillion industry spread over more than 80 countries with the bulk of it concentrated in very few markets. Comparing data from different sources shows that just 10 countries account for almost 95% of the world’s sharia compliant assets. Saudi Arabia and Iran lead the way with 25% to 30% market share each, followed by Malaysia (12%), the UAE (10%), Kuwait and Qatar (5.5%), Türkiye and Bahrain (3.5%), Indonesia and Pakistan (2%).

These countries drive the growth of Islamic finance, set industry standards and foster innovation. Over the past decade, Islamic finance grew at an exponential yearly pace of around 10%. According to the 2023 State of Global Islamic Economy report, total sharia-compliant assets will grow to $5.95 trillion by 2026 although that depends on the economic well-being of these 10 markets.

Islamic finance’s primary sphere of influence is of course the Arab world thanks to its Muslim-majority populations and abundance of petrodollars. The Middle East and North Africa (MENA, which excludes Iran) are home to over 190 Islamic banks.

The share of Islamic banking from total banking assets varies among Arab countries, with Sudan recording the highest share at 100%, followed by Saudi Arabia at 74.9%, Kuwait at 51%, Qatar at 28.6%, Djibouti at 25.0%, the UAE at 22.7%, Jordan at 17.8%, Palestine at 17.4%, Oman at 16.6%, and Bahrain at 16.1%.

The Gulf Cooperation Council (GCC) dominates the world of Islamic finance with over 97% of the top 50 Arab Islamic banks’ assets (see table below).

The region’s 15 largest Islamic banks are all GCC-based and accounted for nearly $770 billion assets in 2022. These banks sometimes branch out abroad—Bahrain’s Bank al Baraka for instance has offices in more than 15 countries. A milestone for the region was the finalization Kuwait Finance House’s acquisition of Bahrain’s Ahli United late 2022. The $8.8 billion created the second largest Islamic bank in the world with over $120 billion combined assets (see table below).

Up until recently, North African countries considered Islamic finance to be an unwelcome interference from Gulf states. Islamic banks and financial products were outlawed or strictly monitored.

Morocco allowed it last. In 2017, the regulator, Bank Al-Maghrib, allowed five Islamic banks to start operating in the kingdom. The country also issued its first Islamic bond or sukuk in 2018. By 2022, “participatory finance” as it is called there was worth $2.7 billion. Sharia-compliant lenders represented only 2% of the local banking market but their assets grew 20% year over year, a much higher growth rate than that of conventional banks.

That same year, Islamic lenders had a 5.1% market share in Tunisia and 2.4% in Algeria where Islamic banks already existed. Governments are currently working on legal frameworks to introduce sukuks and pushing for conventional banks to develop and commercialize sharia-compliant products.

Egypt, North Africa’s biggest market issued its first Islamic bond in 2023. Sharia-compliant finance grew 22% between 2022 and 2023 and represents about 4% of the local banking sector according to the Egyptian Islamic Finance Association.

If MENA represents Islamic finance’s past, the Asia-Pacific region—where the majority of the world’s more than 1 billion Muslims live—may represent its future.

Today, the Asian-Pacific region represents almost 25% of the global Islamic finance market. In Malaysia, sharia-compliant institutions account for close to one-quarter of the financial sector. Kuala Lumpur is one of the main drivers of the global sukuk market and weighs in on international compliance with the Islamic Financial Services Board, one of the world’s two major Islamic finance regulatory bodies.

Other mature Asian Islamic finance markets include Bangladesh, Brunei and Pakistan where sharia-compliant assets make up more than 15% of total bank assets.

Surprisingly, Islamic finance is still in its infancy in Indonesia even though its population is 90% Muslim. In 2023, sharia-compliant lenders accounted for only about 8% market share. In recent years, the authorities began to see the potential of Islamic finance and developed a roadmap to develop the sector with the help of Malaysian expertise that led to the consolidation of three entities to create of Bank Syariah, one of world’s ten biggest Islamic lenders. The country is also a pioneer for green Islamic bonds.

The nature of the African market—huge territories, little financial education, lack of regulatory frameworks—makes it challenging for Islamic banks to establish a presence in most Sub–Saharan countries. If sharia-complaint finance is to develop on the African continent, chances are will be led by banks from Egypt, Sudan and Morocco.

At this stage, Islamic finance in Africa tends to spread through private or sovereign bonds rather than brick-and-mortar banking. African governments see Islamic finance as a tool to raise development funds on international markets and diversify their pool of investors but so far, the results have been limited.

“We expect the top three sukuk issuers in Africa—South Africa, Egypt, and Nigeria—will continue to play a role in Islamic finance. Rated African sovereigns’ sukuk issuance amounts to almost $4.3 billion and has accounted for more than two-thirds of Africa’s total issuance of $6.6 billion since 2014” reports S&P in its 2024 assessment. However, “the complexities of sukuk and changes to sharia standards continue to intimidate African sovereign and slow adoption rates.”

In the aftermath of the 2008 crisis, Islamic finance appeared as a relatively safe alternative to the teetering Western banking system. Sukuks seemed like a good way to tap into new markets, Islamic funds represented opportunities to access large amounts of liquidity and Islamic banking was a way of monetizing local Muslim communities.

London positioned itself to become the hub for sharia-compliant finance in the Western world. Today, the UK boasts five licensed Islamic banks, over 20 conventional banks offering Islamic financial products.

Other European countries where Islamic finance made a remarkable start include:

France—which has the largest Muslim population in Europe—is also a promising market. Authorities (including France’s former minister of finance and IMF director Christine Lagarde) have pushed hard for the development of Islamic finance there, yet banks have largely failed to respond due to fears that being associated with Islam at a time when the country is targeted by terrorist attacks would damage their reputation. French investment banks however offer sharia-compliant products and services to cater to the needs of wealthy foreign clients. 

Russia has also started offering Islamic finance products through fintechs like Payzakat, or traditional banks. The idea is both to cater to its Muslim population and help its banks scale into MENA markets, like Sberbank the leading Russian lender who set up in Abu Dhabi in 2020.

Elsewhere in the world, some US banks have started offering sharia-compliant products but such offerings remain a very small niche. South America is the last continent where Islamic finance is taking root. Mexico is starting to think about it. In December 2017, Trustbank Amanah, the continent’s first Islamic bank, bank opened in Surinam.

In just a few decades, Islamic finance has established itself as a significant player in global finance. Today, with thousands of institutions around the world, this sector is no longer limited to the devout clientele of Muslim countries in the Middle East and Southeast Asia. It has successfully gained market share in Europe, Asia, Africa, and North America, where a diverse clientele is drawn to the Sharia-compliant principles of risk-sharing and social responsibility. As global investors increasingly prioritize sustainability and ethics, Islamic banking’s alignment with these values positions it as a key player in the burgeoning sustainable finance movement.

Islamic banking has also proven resilience in turbulent economic times. By prohibiting speculation and leveraging risk-sharing mechanisms, Islamic banks have demonstrated their ability to withstand crises, sometimes better than the conventional sector, a strength particularly relevant for investors in today’s uncertain economic climate. With a host of new financial innovations and robust regulatory backing, Islamic banking is poised for a bright future.

Islamic finance is a way of doing financial transactions and banking while respecting Islamic law or sharia. Islamic finance hardly existed 30 years ago yet today is a $3.96 trillion industry with over 1,650 specialized institutions located all around the world. Islamic banks are by far the biggest players in the Islamic finance industry and account for $2,7 trillion or 70% of total assets. According to a 2023 State of Global Islamic Economy report, total sharia-compliant assets are expected to grow to $5.95 trillion by 2026.

Islamic finance only represents about 1% of global financial assets but with a compound annual growth rate of 9%, it is expanding quicker than conventional finance. In some geographies like the Gulf Cooperation Council (GCC) or Sub-Saharan Africa, Islamic banks now compete directly with Western banks to attract Muslim clients.

So what is behind the success of Islamic finance? What makes Islamic finance special? Why is it growing rapidly?

All Islamic finance investments, acquisitions, and transactions must reflect Islamic values. Dealing with anything illicit (haram) like alcohol production, pork breeding, arms manufacturing, or gambling is strictly forbidden. It is interesting to note that similar initiatives exist in other faiths—the STOXX Index for example only selects companies that respect Christian values.

This ethically-driven approach to business partly explains the success of Islamic banks at a time when many customers lack trust in the financial system. Moreover, sharia-compliant entities have proven themselves in times of crisis.

Because Islamic law holds that making money from money is wrong, sharia-compliant institutions tend to refrain from engaging in speculation. They traditionally avoid derivative instruments such as futures or options and prefer to have assets grounded in the real economy.

This substantially protected Islamic banks from the 2008 financial crisis. Unlike their conventional counterparts, sharia-compliant banks were not involved with toxic assets and resisted the shock better.

“Adherence to Shariah principles—which precluded Islamic banks from financing or investing in the kind of instruments that have adversely affected their conventional competitors—helped contain the impact of the crisis on Islamic banks”concluded a 2010 IMF report.

This is a major reason why Islamic finance now has a serious, stable and trustworthy image around the world.

Many of the products offered by Islamic financial institutions are comparable to Western or conventional finance even though interest and speculation are forbidden. Banks are by far the biggest players in Islamic finance—some of them are exclusively Islamic while others offer sharia-compliant products but remain mostly conventional.

Aside from the absence of interest rates, the key concept of Islamic finance is risk sharing between parties in all operations. Here are some of the key sharia-compliant products offered by banks—they have Arabic names but in most cases we can find an equivalent in conventional Western banking.

Mudarabah or profit share: An investment in which the bank provides 100% of the capital intended for the creation of a business. The bank owns the commercial entity and the customer provides management and labor. They then share the profits according to a pre-established ratio that is usually close to 50/50. If the business fails, the bank bears all the financial losses unless it is proven that it was the customer’s fault.

Musharakah or joint venture: An investment involving two or more partners in which each partner brings in capital and management in exchange for a proportional share of the profits.

Takaful or insurance: Sharia-compliant insurance companies offer products comparable to conventional insurance companies and functions like a mutual fund. Instead of paying premiums, participants pool money together and agree to redistribute it to members in need according to pre-established contracts. The common pool of money is run by a fund manager.

The fund can be run in different ways when it comes to the surplus distribution and the fund manager’s compensation.

There are three big models:

In some cases, the fund manager creates a waqf, or a charity fund.

Sukuk or bonds: Sharia-compliant bonds began to be issued in the 2000s and standardized by the AAOIF—a Bahrain-based institution that promotes sharia-compliant regulation since 2003. Today, over 20 countries use this instrument. Malaysia is the biggest issuer, followed by Saudi Arabia and issuers outside the Muslim world include the UK, Hong Kong, and Luxembourg.

Sukuk issuance took off in 2006 when issuance hit $20 billion. Apart from a drop in 2015–2016 volumes then grew steadily to reach an all-time high of $162 billion in 2019, up 25% from 2018. This record number was backed by strong appetite from Malaysia, Indonesia, Gulf Cooperation Council (GCC) countries and Turkey.

That was before COVID 19. According to credit ratings agency Standard & Poor (S&P), the volume of issuance should drop around $100 billion.

“The market was, in fact, poised for good performance in 2020 but the pandemic and lower oil prices changed the outlook. Amid tougher conditions, we also don’t see core Islamic finance countries using sukuk as a primary source of funding despite their higher financing needs,” says S&P in its 2020 report on Islamic Finance.

Other industry experts beg to differ. Refinitiv research says sukuk issuances will continue to grow and could reach $174 billion in 2020 backed by government funding requirements.

Like conventional bonds, sukuks are very appealing to governments for raising money to spend on development projects. Their main challenge remains standardisation; buyers tend to find it more difficult to assess risk than with regular bonds.

Islamic finance also exists in the form of investment funds.

For hundreds of years, there was no need for Islamic finance because there was simply no financial system to “Islamise.” Up until the second half of the 19th century, the vast majority of the Muslim population around the world was unbanked and the prohibition of interest was applied on transactions by tradition rather than by law or regulatory bodies.

During the colonial era, Western banks and financial institutions penetrated Muslim countries and imposed interest-based methods on the Islamic world. In the 1940s and 1950s, independence movements pushed for the revival of Islamic culture and religious scholars in countries such as India, Pakistan and Egypt started to condemn the use of interest by banks. They proposed to prohibit interest and replace it with Islamic risk-sharing. Localized Islamic finance experiments took place in the 1960s in Egypt and Malaysia.

In many ways, Islamic finance was born as a rebellion against colonialism and for self-determination. The idea was to provide an ethical alternative to the Western-dominated international financial system based on the Quran.

In the 1970s, Persian Gulf countries—which were both suddenly incredibly rich with petro-dollars and extremely conservative in religious belief—took Islamic finance beyond local experiments and created the Saudi Arabia-based Islamic Development Bank in 1975 followed by the Dubai Islamic Bank in 1979. Because the establishment of the first sharia-compliant institutions coincided with the rapid economic development of their home countries, a large share of Islamic investments went into the construction and real estate sectors.

Islamic finance expanded quickly, first in the Arab world and East Asian countries with significant Muslim populations before reaching the West and especially the UK in the early 2000s. In parallel to that expansion, two regulating bodies emerged—the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) in Algeria (now relocated to Bahrain) and the Islamic Financial Services Board (IFSB) in Malaysia.

Today, there are over 1,650 Islamic financial institutions spread all over the world and total sharia-compliant assets represent $3.9 trillion. Although Islamic finance is less than 1% of the global financial market, it is one of the fastest-growing segments, attracting at times non-Muslim customers. While consolidating their existing markets, sharia-compliant entities have started to branch out into new territories, notably Sub-Saharan Africa and Europe. In a world that increasingly worries about environmental, social and governance issues, some depositors and investors see Islamic finance as an ethical way of dealing with their money.

Islamic finance offers products and services that comply with Islamic law (sharia) but who decides what is and is not sharia-compliant and what mechanisms exist to enforce those judgments?

Each Islamic finance institution has a sharia supervisory board (SSB). The board is composed of at least three jurists. They are paid by the bank but act as independent consultants. Their role is both consultative and regulatory: They answer the staff’s questions, advise on charity contributions (zakat), verify operations and certify products.

SSBs decide what is allowed (halal) or forbidden (haram) based on the two main sources of Islamic law: the Quran and the Sunnah—or what the Prophet Muhammad reportedly said and did during his lifetime. Board decisions are taken by majority vote and binding on the bank.

SSB members are typically religious scholars who specialize in Islamic jurisprudence. In Western countries like the UK, they can also be non-Muslims experts who have studied such matters extensively.

Over the past 10 years, Islamic finance has rapidly expanded across the world and finding qualified people to sit on SSBs has become challenging. In the world of Islamic finance, reputation is key and sharia non-compliance can be fatal to a bank.

At there international level, there are two supervisory bodies for Islamic finance: the Bahrain-based Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the Malaysian Islamic Financial Services Board (IFSB).

These bodies collaborate with institutions such as the IMF or the World Bank to promote sharia compliance globally. The AAOIFI sets basic standards for the Islamic finance industry while the IFSB issues recommendations based on risk assessments.

In Bahrain and the United Arab Emirates, AAOIFI standards are mandatory but in most countries their standards and recommendations are not binding. If a bank doesn’t comply, there are no sanctions. It is up to each country’s government to enforce certain rules through their central banks who impose those rules on sharia boards.

In all countries—except Sudan and Iran—Islamic finance exists alongside conventional banking. For Islamic banks, this means navigating a dual regulatory framework: the country’s laws and regulations as well as sharia compliance.

Shortly after taking office on July 1, new President José Raúl Mulino confirmed one of his biggest campaign promises: the start of the 391-kilometer Panama-David rail project that will link the country’s disparate regions.

At an estimated cost of $5 billion, Mulino described the rail line as “the most important work of my government.” Construction is expected to take six years and generate 6,000 jobs.

An even pattern of development is much needed in the isthmian republic. Panama enjoyed double-digit growth from 2007-2011 from Canal expansion and other infrastructure projects. By 2013, GDP growth fell to 6.9%, once those projects ended. Corruption and governance failings were also a factor in this decline. Foreign direct investment (FDI) fell from $5.01 billion in 2017, to a nadir of $588.7 million in 2020, $3.7 billion less than 2019. This can be attributed mainly to the pandemic but poor governance played its part.

In May, Huawei selected Panama for its first Cybersecurity and Transparency Center. On the flip side, however, telecom operator Digicel announced in March that it was closing its Panama operations. The following month, Sinclair Oil closed its concession in Darién, which had been operating since 1923.

Given this mix of developments, voters are hoping that Mulino’s new administration will be a link to Panama’s recent “golden age” of economic growth, when FDI regularly reached $3.4 billion to $4.4 billion a year. In 2023, this had fallen to $2.2 billion and a KPMG report last year placed Panama as ninth most attractive for FDI in Latin America, below Argentina.

“We have to reverse that image that was damaged, but we will do it,” says Quevedo.

While artificial intelligence was already promising profound changes in the traditional banking business model, the latest innovation in the technology—generative AI—portends a multisensory revolution in banking services. Indeed, GenAI, with its ability to collect and interpret financial data on a vast scale, could force some of the Arabian Gulf region’s biggest banks to rethink their already costly digital banking strategies.

GenAI’s insatiable appetite for data offers banks in the Gulf Cooperation Council states the prospect of not only a more intimate relationship with customers, but also improved management processes, such as fraud detection and other important back-office functions. Unsurprisingly, banks that are best able to quickly deploy GenAI are looking forward to a return on their bottom line, despite concerns over the human impact of the new tech.

Banks that integrate and scale GenAI could see a 22% to 30% improvement in productivity over the next three years, Accenture estimated in a February report on AI in banking, and up to 600 basis points in revenue growth, and 300 basis points in return on equity. In the US, the giant management consultant found, 73% of time spent by bank employees has a high potential to be impacted by generative AI, some 39% by automation, and 34% by augmentation.

Whether those figures would apply to GCC financial institutions is unknown; what is clear is that the Gulf’s petrodollar revenue and its governments’ ability to lavish significant sums to gain a position in GenAI, makes GCC banks financially well positioned to adopt the latest innovations and capitalize on market demand.

Boosting that scenario are highly positive consumer attitudes in the region toward innovative technology such as mobile commerce and the rapid take-up of digital banking by GCC institutions’ customers that sped the rollout of AI chatbots in customer service.

Major Gulf banks, including Al Rajhi Bank of Saudi Arabia, Qatar National Bank, and National Bank of Kuwait are already using AI to varying degrees. In the United Arab Emirates, Emirates NBD has partnered with management consultants McKinsey and QuantumBlack—the firm’s AI arm—with the latter reportedly involved in the design and early-stage deployment of generative AI use cases.

But with GenAI chatbots now available based on OpenAI’s ChatGPT and Alphabet’s Bard, workers can engage and use the latest AI iterations as digital assistants, transforming the way in which banks do business. New opportunities to drive customer engagement, such as gamification, also promise to increase customer retention.

Whether through automation or augmentation, Accenture expects dramatic results in the back, middle, and front offices,  predicting 25% of all staff will be impacted by both. The UAE is backing AI at the government level, with the minister for AI—a position created in 2017—noting in February that nine banks and nine other financial institutions are using blockchain solutions.

The UAE, which has its own AI university, has taken another technological leap, launching its own open-source, open-access large language model. The latest version, Falcon 2, offers itself as the Gulf’s answer to Google’s and Meta’s GenAI innovations. Falcon 2’s array of applications, and its developer’s claim that it is the only AI model with vision-to-language capabilities, makes it probable GCC banks will want to evaluate a homegrown variant.

Generative AI’s potential to rescript the business of banking implies almost limitless applications. However, having poured millions if not billions into digital banking, GCC banks may hesitate over another round of technology investment expenditure. And there is also the question whether they are nimble enough.

“Banks have been traditionally product-centric,” says Rajesh Saxena, CEO of Retail and Central Banking at Intellect Design Arena, a fintech designer for financial services. “This approach has made large-scale transformations within banks time-consuming, expensive, and risky, not least because the back-end systems and products are all embedded into a monolithic architecture.”

But if the cost base for GCC banks is similar to their international counterparts’—staff compensation at global banks makes up half the cost-base on average, Moody’s Investors Service estimates—they may wish to accelerate GenAI integration. Regardless of the potential upheaval, Saxena thinks the latest innovations could quickly up banks’ compliance programs, where generative AI’s speed and accuracy could contain reputational exposure to issues such as money laundering, etc.

“AI algorithms analyze vast amounts of data to assess credit risk, detect anomalies, and prevent AML fraud,” Saxena notes. That might be particularly relevant to financial institutions in the UAE. Earlier this year, the Paris-based Financial Action Task Force removed the UAE from its “grey list” for deficiencies in money laundering controls, a move that drew criticism from some anti-money laundering analysts.

Many traditional banks’ initial indecisiveness in rolling out AI prompted many analysts to predict that more dynamism of challenger or neobanks could end their dominance. And challenger banks have doubtless upped the stakes, especially in customer service and with product innovations such as Buy Now, Pay Later (BNPL). But the premise that they are displacing traditional banks in the US and Europe is unproven.

So, what about the GCC?

With fintech valuations still high, the likelihood of traditional banks acquiring their upstart rivals is questionable. And venture capital, the main source of funding for many fintechs, is also under pressure. Data from PitchBook shows a downward shift in investor sentiment that might slow further funding rounds. Global deal activity fell to $350 billion last year, from $530 billion in 2022.

In the GCC, a digitally savvy population’s strong focus on user experience has helped neobanks disrupt the status quo for their traditional rivals. Fintechs in the region have benefited not only from innovative technology but from targeting a specific market segment, says Michael Ashley Schulman, partner and CIO at Running Point Capital Advisors.

That leadership could prove temporary, however, and may be just as likely to benefit traditional banks.

“GenAI can quickly make traditional banks more efficient and effective,” says Schulman. “It may threaten challenger banks by eroding competitive advantage more than it helps them; neobanks have been known for innovation for more than a decade, but the digital gap has narrowed and their frontrunner status may slip faster with generative AI.”

So, is that goodbye to further growth for neobanks? Not quite.

Some analysts, including Schulman, speculate the rivals could find a compromise that results in more collaboration. “An uptick in mergers and exploratory partnerships seems inevitable,” he predicts.

In the US and Europe, challenger banks have lost some of their luster with the realization that banking is built on relationships and that retaining customer loyalty necessitates a presence across multiple—often unexciting—business clusters.

Setting the GCC apart is its importance as a center for Islamic finance, a market with assets of $4.5 trillion in 2022, according to November’s ICD-LSEG Islamic Finance Development report, the latest date for which figures are available. Bahrain and Dubai are positioning themselves as Islamic finance hubs, and applying generative AI would seem a natural progression that could have global implications for the two tech-centered economies.

One advantage: Falling costs of training could also move Islamic finance toward a wider adoption of GenAI. And while the interpretative characteristics of sharia law make adapting AI to Islamic finance a complex task, AI-driven applications and processes that offer opinions on financial products’ and transactions’ validity and adherence to Islamic finance law could further the GCC’s ambitions as a go-to hub.

That said, the need to address cultural and legal issues could hamper development of a dedicated AI tool, warns Yiannis Antoniou, practice head of Data, Analytics, and AI at consultant Lab49.

“The lack of a cohesive and widely accepted cross-border Islamic finance framework leads to complexity and inefficiencies that make multinational financial institutions’ compliance [obligations] especially difficult,” he says.

Automating work and deriving cost savings are just the beginning of what could be an extraordinary chapter in GCC banking. Yet, the real opportunity lies in harnessing generative AI to fuel growth—assuming the latest innovations do not overwhelm banks and result in a loss of control.

“Banks won’t be able to cordon off generative AI’s impact on their organization in the early days of change,” Accenture’s AI in banking report states. “It touches almost every job in banking.”

Still, with substantial financial resources and a falling cost of training personnel in AI, banks in the GCC have an opportunity to overtake the successes of their maverick fintech rivals.

Adnan Bokhari knows how to balance a ledger. He’s a practicing CPA who was named CFO of JA Worldwide, a global nonprofit youth organization, about a year ago. His wife is also a CFO and a CPA. But their three kids? They have zero interest in following in their parents’ footsteps. It’s not just a case of rebellion, either. Bokhari has noticed a broader trend: Fewer and fewer young people are interested in his line of work.

“The risk/return matrix is not appealing,” Bokhari remarked during a recent webinar with The CFO Alliance, a peer group of some 9,000 finance pros.

Chief financial officers arguably have never had a bigger role. They oversee the entire financial operations of a company: from strategic financial planning and risk management to advising on investment decisions and ensuring regulatory compliance. And they typically boast a deep understanding of accounting principles, analysis, and business strategy—essentials in guiding an organization toward its goals.

There’s just one problem, Bokhari says: “We’re competing with glamour.”

Indeed, it’s hard to make accounting sexy when “Instagram influencer” is a viable career option.

CPAs, or certified public accountants—a prerequisite to becoming a CFO—meanwhile, are battling a low-compensation perception. If becoming a CFO is the goal, the average salary—at least within a private company generating less than $20 million in annual revenue—is $194,000. After all those grueling years of education, a CPA might well hold their paycheck up to those of other professions and think, “Was it worth it?”

As Bokhari puts it, “If you look at all the other professions that require similar years of formal education and the other barriers that are associated with it, [or] you get to the point of actually becoming an accountant and you compare yours with the salaries of others starting professions, it’s not exactly equitable at all.”

Many of the participants on the CFO Alliance webinar nodded. Bokhari’s observations, they agreed, highlight a serious issue in the corporate finance world: making numbers cool again. Until that is resolved, it seems the dream of inspiring a child to become a future CFO remains just that: a dream.

Bokhari isn’t alone. A recent survey conducted by the CFO Alliance of 450 CFOs revealed a surprising twist in their nightly worries. When asked, “What keeps you up at night?” the top concerns weren’t just usual suspects like revenue and operational efficiency. The true monster under the bed was hiring and retaining employees.

Over 50% of the respondents confessed that they are not just crunching numbers but also doing succession planning and ramping up their mentoring efforts. As it turns out, teaching the next generation of finance whizzes is a priority, but mastering the art of mentorship and delegating duties to up-and-comers is proving difficult—especially when they don’t want to show up to the office.

That’s just the post-Covid way, Joel Quall, CFO of tZERO, a financial blockchain technology company, laments. “A mere four years ago, everyone went to the office five days a week,” he recalls. “Now you have a different culture that—right, wrong, or indifferent—don’t want to come to the office every day. They want to be hybrid, or they want to work from home entirely, a hundred percent of the time.”

The situation is worse if a company pays exorbitant rent for a metro-area office and no one shows up, Quall adds. “There has to be a happy medium. It’s been a struggle to get everyone to come back to the office.”

Even when the talent roster is in place at the office, too often a tech-savvy team appears perfect on paper but lacks the crucial skills higher-ups would like to see.

Recall the many high-profile CFO announcements from the past year: SoundCloud’s Drew Wilson departed amid rumors of a potential $1 billion sale of the Berlin-based streaming company. Dennis Weber became CFO of Swiss International Air Lines, effective May 1. And Marc Page will take the role at London-based Metro Bank Holdings starting September 2.

Turnovers and new arrivals like these are happening at a rapid clip, underscoring just how tight the job market is at the CFO level. That’s also the case for steppingstone roles, such as vice president and executive vice president. The likelihood of these candidates getting hired or promoted should hinge not just on their qualifications to perform the function but also on their ability to create tangible value within the company, says Christian DeChurch, CFO of Centri Business Consulting.

Many finance and accounting professionals, however, are only “technicians.” That means “they’re really good with numbers but not able to connect the numbers to a strategic vision or value creation plan,” DeChurch adds. “Also, the pace of play these days is too fast, and waiting until you have all the answers will only put you more behind.”

Going forward, the best candidates will likely have a knack for wielding emerging tech. Automation tools and artificial intelligence will revolutionize talent acquisition and development strategies by radically expanding the CFO skillset.

“I believe it will have a major impact,” DeChurch predicts, starting from an implementation perspective as it pertains to finance and accounting—the CFO’s bread and butter.

“In order to become better operators, businesses are transforming their current tech stack into something more meaningful,” he says. “Secondly, the data output from the new tech stack will need an analyst mindset, not number crunchers. This will be new for many who are used to debits and credits, and now must tell the story through the numbers and explain the ‘why’ throughout the business.”

DeChurch posits a simple reason why CFOs across the globe are stressing out over hiring and retention. It’s “because many folks think of themselves as ‘the boss’ and not a mentor,” he tells Global Finance. “Work, like many other things in life, is an apprenticeship model with mentors and mentees. If people don’t sign up for your program or a mentee quits your program, then you need to look in the mirror.”

Many companies have used mentorship programs to foster leadership development to great effect, including Goldman Sachs, Procter & Gamble, IBM, and General Electric. If that doesn’t work, it’s on you, DeChurch concludes flatly.

“I don’t believe people are afraid to work hard and go above and beyond, but they want and need guidance, a voice, and an ownership or accountability stake in the project,” he says. “There are no bad teams, only bad leaders. We are responsible for mentoring folks into today’s demands and transforming them into analysts, [teaching them about] being more strategic and adding real equity value, what it means to project manage an IT implementation, how to have hard conversations, how to negotiate critical agreements, and everything else that might come out of left field.”

For Robin Helfer, a former CFO of clothing company Ashley Stewart, mentorship starts at the college level, because fewer students overall want to study accounting and finance.

“We’re seeing more people go toward other majors that really didn’t exist years ago, like business analytics, as an example,” she says. “And I’d say in general, attracting accounting talent is just an issue, because you need additional credits in order to be certified. I think that is a hindrance as well.”

But while the lure of new, trendy majors is a serious problem, she isn’t waving a white flag. Helfer is a committee member at her alma mater, Binghamton University, and its School of Management Alumni Advisory Board, which is tasked, among other issues, with keeping the talent pool from drying up. 

“It is one of the major obstacles that we, as CFOs, face,” Helfer says. “We have to figure out a way to continue to attract talented students into the accounting major so that it’s ultimately feeding the talent pipelines for our organizations.”

Already one of the wealthiest regions in the world, the Gulf Cooperation Council states are solidifying their status as a hub for global fortunes. According to Boston Consulting Group, the region’s financial wealth is expected to grow by 4.7% annually by 2027, reaching $3.5 trillion, up from $2.8 trillion in 2022.

“While global growth overall is moderate, the GCC is one of the fastest-growing regions and stands at the forefront of global wealth accumulation,” says Abdulla Al-Sada, senior executive vice president of QNB Group Asset and Wealth Management, a unit of Qatar-based QNB Group, the MENA region’s biggest financial institution by assets and the first lender to have established private banking in the emirate. “We are working on an ongoing basis to further enhance and uplift our holistic wealth management offering for our sophisticated and demanding clientele.”

For private wealth managers, the region offers attractive opportunities. The GCC already hosts hundreds of private banks, asset management firms, and family offices, including global leaders like Edmond de Rothschild, Goldman Sachs, and BlackRock. Each month, new firms enter the market.

In December, Farro Capital established a presence in Dubai’s International Financial Center (DIFC). For Rajiv Garg, senior executive officer of the Singapore-based multi-family office, expanding into the Middle East was a “no-brainer,” as “the region’s family office market is projected to exceed $1 trillion by 2026” and offers “a perfect blend of traditional wealth as well as newly minted billionaires and unicorn founders.”

In the past, local entrepreneurs and families typically sent their money to private banks in Switzerland or Luxembourg for safekeeping. According to a recent report by Strategy&, the global strategy consulting arm of PwC, over 70% of the region’s private wealth is currently held in offshore accounts. But today, GCC clients have a new priority: passing wealth to the next generation.

“In recent years, we’ve see a paradigm shift with the increasing importance of generational wealth transfer, tech entrepreneurs and family offices, especially in the United Arab Emirates and Saudi Arabia,” says Antoine Chemali, CEO of BNP Paribas Wealth Management Middle East, who has been working with the region’s families since the 1970s. 

By 2030, an estimated $1 trillion of assets is expected to change hands in the Middle East. Local legislation has evolved to facilitate this process. For many GCC families, which have amassed vast fortunes primarily from oil and gas over less than a century, this will be the first major generational wealth transfer. For asset managers, it is a chance to offer custom-made services.

“We see ourselves as an extension of these families, where we act as their de facto family office with full-service offerings,” says Garg. The goal is to redefine the way families manage their wealth, enter their trusted inner circle, and “guide them in preserving and compounding their assets for generations to come.”

Industry experts anticipate that the new generation will bring a different set of goals to the task than their forebears.

“They will expect innovative financial solutions, digital instruments, sustainable wealth management solutions, and diversified investment products across asset classes globally,” says Sana Al-Hadlaq, senior executive director of Wealth Management at Kuwait’s Kamco Invest, one of the largest asset managers in the region with over $16 billion assets under management. “They expect their wealth managers and institutions to provide them with global reach and access across different markets and asset classes. Investments should comprise all asset classes, including alternative investments with superior returns along the dimensions of private equity, venture capital, and real estate,” says QNB’s Al-Sada.

While reaching across the planet, these younger clients will also be keeping much more money at home.

“International investment remains attractive, but there is a growing trend of these clients retaining a more significant portion of their assets in the region,” says Michel Longhini, group head of Global Private Banking at First Abu Dhabi Bank, the UAE’s largest bank. “This trend has been one of the key drivers of growth and diversification of private wealth management in the UAE and the GCC countries as governments have introduced more robust regulatory frameworks and initiatives to encourage the establishment of local investment companies.”

PwC forecasts the regional wealth management industry growing faster than the global average, reaching $500 billion in onshore assets by 2026, up from $400 billion in 2022, creating significant opportunities for local players to step up their game.

Besides fortunate heirs, the GCC has also become a destination for the globalized wealthy. According to the Henley Private Wealth Migration Report, the UAE has seen the largest influx of millionaires in the world since the pandemic, drawing 4,000 to 5,000 new residents annually from countries like India, the UK, Pakistan, Nigeria, and China. These migrants seek a safe haven to park their fortunes but also new business opportunities and a luxurious lifestyle, according to Vipul Kapur, head of Private Banking at Mashreq, one of the UAE’s largest private banks.

To attract new high-profile residents, GCC governments have adapted their conservative legal systems, introducing reforms to labor laws, residency programs, golden visas, and new ownership rules for property and businesses.

“The UAE and other GCC countries have implemented regulatory reforms to build a more robust financial environment, draw investment, and unlock their dynamic economies,” says Longhini. In 2023, FAB Private banking reported 14% year-on-year revenue growth and a 22% increase in assets under management, thanks mainly to new client acquisition.

New money is expected to keep flowing into the GCC this year. The UAE’s removal earlier this year from the Financial Action Task Force’s “grey list” of countries working to address deficiencies in their regimes for countering money-laundering and terrorist financing promises to further boost investor confidence. In Saudi Arabia, a policy requiring foreign companies to establish regional headquarters in the kingdom to do business with the government is likely to attract new fortunes eager to tap into the MENA region’s largest market.

Private wealth and asset management has traditionally been dominated by international financial institutions, but local ones are rising to the challenge, especially in regions where the new wealthy are proliferating. For some, this means forming partnerships.

“We have built strategic alliances with international partners,” says Al-Hadlaq. “We complement the value offered by Western financial institutions by providing them access to the best opportunities and services here.”

Other local managers prefer to compete for the best products and services.

“We need to differentiate through specialized services, customer experience, and innovative solutions,” says Mashreq’s Vipul Kapur. “This means adapting to new technologies, managing security risks and meeting customer expectations for seamless digital experiences.” 

Competition fierce in digital products and fintech, where AI is expected to open new horizons.

“This will challenge us to rethink the way we do business and operate,” says QNB’s Al-Sada. “These technologies will transform the entire asset and wealth management industry from the front to the back office, with an emphasis on personalization and increases in productivity.”

With both local fortunes and international client bases growing, the outlook for GCC asset managers that can seize the opportunity is positive. New technologies may even help them catch up with global industry leaders more quickly than anticipated. As regulatory environments continue to evolve, the region is looking forward to a surge in financial innovation, including blockchain technologies and green finance initiatives, further solidifying its role in the global financial ecosystem.

As they grow in sophistication, GCC asset managers are also increasingly looking to take their homegrown expertise beyond their borders and expand into new markets across Africa and Asia, where they aim to tap into emerging nodes of high-net-worth individuals.

Amid a global landscape characterized by sluggish growth, soaring interest rates, and inflationary pressures, the six Gulf Cooperation Council states stand out for their resilience. Growth across Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain is expected to reach 3.7% this year, soundly outpacing the 2.9% global average, according to consulting firm PwC.

Western lenders and financial institutions are responding by strengthening their presence in the GCC as they scale back elsewhere.

“The GCC has increasingly become an attractive region for banks and investors,” says Antoine Chemali, CEO of BNP Paribas Wealth Management Middle East, which has over 600 employees in the UAE, Saudi Arabia, Bahrain, and Qatar. “The rise of the financial sector in the region creates demand on not only individual needs but also corporate banking and financial solutions.”

With most markets in the region outperforming their global peers, Rola Abu Manneh, CEO of Standard Chartered UAE, Middle East and Pakistan, says the GCC is contributing significantly to her bank’s strategic expansion strategy and its operating income growth.

“We are strategically targeting all markets across the GCC, tailoring our approach to each to leverage our strengths and meet the unique financial needs of our clients,” she says. “[Our] primary focus is on markets such as Saudi Arabia, the UAE, and Qatar, which lead the region’s economic diversification, with abundant opportunities in infrastructure, tourism, and the digital economy.”

Boasting a business-friendly environment and liberal policies, the UAE emerged as a financial hub two decades ago with the creation of the Dubai International Finance Center in 2004. Today, the free zone welcomes over 2,000 companies, including such international banks as HSBC, Royal Bank of Scotland, and JPMorgan Chase. In 2023, Dubai’s Financial Services Authorities registered 117 new firms, a 25% increase from 2022.

More recently, Dubai has become particularly attractive to asset managers and hedge funds, with applications from the latter group increasing 125% year-on-year. Newcomers include US-based Millennium Management and Wellington Management and Hong Kong-based WRISE Wealth Management.

Just an hour from Dubai, Abu Dhabi, the Emirati capital, has become the region’s latest magnet for international finance. Last year, 1,825 companies were registered with Abu Dhabi’s financial center, ADGM, up 32% from 2022. In recent months, Wall Street giants including Morgan Stanley and Goldman Sachs have set up shop alongside private wealth management firms, family offices, and fintechs eyeing investment opportunities as the region fine-tunes its transformation from an oil-rich desert to a global financial hub.

“I am excited about the opportunities,” says Oualid Lahsini, MENA CEO for Brevan Howard, one of the world’s largest hedge funds, which opened in Abu Dhabi’s free zone in 2023. “Engagement with Abu Dhabi and the broader GCC region is a key part of our long-term strategy. We are trading almost a third of our capital from the region.

The GCC economies’ growth over the last 50 years has created “an extraordinary stock of wealth for the public and private actors alike,” Lahsini notes. “Those actors are growing in sophistication and increasingly expect to be serviced locally.”

Saudi Arabia, the Arab world’s biggest market, is the next big thing on every banker’s mind.

The kingdom has revamped its financial sector as firms consolidated to create some of the region’s largest lenders and new legislation eases entry for foreign players. The authorities have adopted a carrot-and-stick approach; foreign firms are only allowed to sign deals with government entities—most deals, as it happens—on the condition that they establish regional headquarters in the kingdom. Effective this year, the rule appears to be working. Goldman Sachs received approval to establish itself in Riyadh in May; BlackRock, the Edmond de Rothschild Group, Deutsche Bank, and others are in the process.

Beyond its oil wealth, the GCC is boosting its attractiveness with a commitment to diversifying its economies. Each state has outlined its ambitions: Saudi Arabia, Qatar, and Bahrain with Vision 2030; Kuwait with Vision 2035; and the UAE with We the UAE 2031.

“The rise of the region is spearheaded by the UAE and Saudi Arabia,” says Chemali, both of which are attracting talent and capital with ambitious projects backed by strong support and investments from governments.

One facet of this drive is heavy investment in infrastructure projects. Notable examples include Neom, Saudi Arabia’s $500 billion futuristic city; Diriyah, Qiddiya, and Al-Ula, the kingdom’s tourism megaprojects; the UAE’s vast solar farms; Qatar’s North Field gas expansion, and the Gulf Railway, slated to connect all six GCC states.

“Financing infrastructure projects is key to creating jobs and opportunities across the region in the long run,” says Abu Manneh. “Encouragingly, GCC governments have adopted this long-term view, which has helped the pipeline of projects to remain strong.” International developers have also stayed engaged. Standard Chartered is among the international lenders providing diversified funding sources for projects including Neom and the North Field gas expansion.

While some critics argue these projects may be overly ambitious, substantial government backing makes them attractive to foreign investors.

“The region’s minimal funding requirements and significant inflows of foreign investment enhance its stability and allure for investors,” Abu Manneh notes.

In contrast to other parts of the world, the GCC’s transformation is powered for the most part by the Gulf states themselves through their large sovereign wealth funds. Often referred to as the “Oil Five,” Saudi Arabia’s Public Investment Fund; the Abu Dhabi Investment Authority, Mubadala Investment Company and ADQ in Abu Dhabi; and the Qatar Investment Authority are among the world’s largest and most active SWFs. The combined assets of the GCC’s 19 sovereign funds will reach $7.6 trillion by 2030, doubling from 2023 and the equivalent to the combined annual GDPs of the UK and Germany, according to industry tracker GlobalSWF’s 2024 annual report.

The GCC states are also leveraging deep financial-sector reforms to attract global investors. Many have introduced structural changes to their capital markets, leading to a surge in initial public offerings.

“The launch of innovative investment products, enhancements in post-trade infrastructure, and an increase in IPO activities have rendered the market more vibrant and approachable,” Abu Manneh says.

According to EY, the entire MENA region saw 48 IPOs in 2023, raising a total of $10.7 billion. The most significant market debut was ADES, the Saudi oil and gas drilling firm, which drew $1.2 billion, followed by Abu Dhabi’s Pure Health with $986 million. Saudi Aramco’s 2019 IPO remains the largest in history, raising $25.6 billion. Tens more companies are expected to list in 2024 and several GCC members are planning to privatize state assets; Oman, for one, aims to sell shares in at least 30 state-owned companies over the next five years.

Promisingly, financial-sector reforms have spurred investment across more sectors than just energy, including tourism, new technologies, and artificial intelligence, the latter of which the GCC economies aim to be at the forefront. Saudi Arabia plans to create a $40 billion fund to invest in AI, and in April, Microsoft committed $1.5 billion to G42 following the announcement of the Emirati AI firm’s partnership with OpenAI. This flurry of activity promises to add legs to the GCC states’ robust non-oil sector growth of 4.3% in 2023.

There is more work ahead on the financial front, Lahsini says. “Local capital markets are still very dominated by the equity story,” he says, “and I believe more can be done to develop fixed income and credit markets and to provide local actors with more options to fuel the growth.”

That said, the GCC states are solidifying their position as an attractive destination for foreign capital, while consistent government support and substantial financial resources are paving the way for a growing influx of international financial institutions.