Islamic banking deposits in SA have grown 151% in five years

Over the past decade, South Africa has established itself as one of the most developed Islamic finance markets in the Southern African Development Community (SADC), with banking institutions, asset managers, Takaful (cooperative insurance) providers, scholars, regulators, and industry bodies working together to build a credible and sustainable ecosystem.

Although Islamic banking remains modest relative to the conventional banking industry, what began as a niche offering has developed into a recognised part of our financial services landscape.

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Islamic banking in South Africa recorded robust growth between December 2020 and December 2025.

According to the Banking Association South Africa (Basa) aggregate customer deposits increased from R43.3 billion to R108.7 billion, representing growth of approximately 151%.

Financing assets increased from R16.9 billion to R25.7 billion over the same period.

Providers

Shari’ah-compliant banking services are offered through dedicated Islamic banking windows within several major commercial banks, supported by appropriate governance and operational separation, alongside one fully-fledged Islamic bank.

These institutions provide retail, commercial and corporate banking solutions structured in accordance with Islamic commercial jurisprudence and governed by independent Shari’ah supervisory boards.

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The reality, however, is that despite strong growth, a substantial portion of South Africans who seek Shari’ah compliant financial solutions remain underserved.

At the same time, many South Africans, regardless of faith, are increasingly attracted to ethical, transparent, asset-backed and risk-sharing financial models.

Broader financial inclusion and market development

Islamic finance therefore offers an opportunity not only to serve a particular community, but also to contribute meaningfully to broader financial inclusion and economic development.

Although Islamic banking is unlikely to rival the conventional banking sector in overall market share, its continued development enhances financial sector diversification, expands consumer choice and contributes to deeper market development.

To translate current momentum into sustainable long-term market share, the industry should prioritise:

Development of deeper Islamic capital markets and liquidity management instruments;
Greater standardisation of Shari’ah governance frameworks and legal documentation; and
Enhanced public awareness and financial literacy regarding Islamic banking.

These initiatives will strengthen competitiveness while supporting broader financial inclusion and market development.

Islamic banking for the unbanked and underbanked reflects the industry’s commitment to ensuring that financial inclusion remains central to the industry’s development.

At a time when many economies are searching for mechanisms to promote inclusive growth, Islamic finance has a unique ability to combine commercial objectives with social impact.

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Through partnerships with charitable institutions, waqf (endowment) initiatives and social finance organisations, Islamic finance can play an important role in addressing some of the socioeconomic challenges facing our country.

The industry’s contribution extends beyond financial transactions to supporting sustainable community development and social upliftment.

The future

Innovation is critical to preparing Islamic finance for the future.

The rapid pace of technological change, particularly in digital banking, artificial intelligence, and fintech, presents both opportunities and challenges.

Islamic financial institutions must continue to innovate while maintaining strong governance and Shari’ah compliance frameworks. Those institutions that successfully combine innovation with authenticity will be best positioned to serve future generations of customers.

Industry stakeholders have also consistently highlighted the importance of regulatory clarity and proportionality. Progress is being made through collaborative engagement between industry participants, Basa, regulators and other stakeholders.

Continued dialogue will be essential to create an enabling environment that supports innovation while maintaining prudential soundness and customer protection.

Another priority is human capital development. South Africa has made considerable progress in developing scholars, practitioners and Islamic finance professionals.

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Sustainable growth will however require a larger pipeline of talent with expertise spanning Shari’ah, finance, risk, legal disciplines, technology and product development.

Industry-wide initiatives aimed at scholar and professional development are underway.

Industry challenges will be overcome because of the spirit of collaboration that exists within the industry. Banks, scholars, asset managers, insurers, regulators and industry associations do not always share identical perspectives, nor should they.

Healthy debate is essential. However, they are united by a common objective: to build a robust, credible and sustainable Islamic financial services industry that contributes positively to South Africa’s economy and society.

The opportunity is significant.

South Africa possesses sophisticated financial markets, strong institutions, world-class banking expertise, and a growing body of Islamic finance knowledge.

With continued collaboration, innovation and regulatory engagement, there is the potential not only to strengthen Islamic finance domestically, but also to position South Africa as a gateway for Islamic finance across the African continent.

Five-year balance sheet snapshot (December 2020 to December 2025)

Source: Banking Association South Africa (Islamic Banking sub-sector reporting) and South African Reserve Bank BA900 returns.

Bongiwe Kunene is managing director of Basa. She was speaking at the 2026 Basa Islamic Banking Conference: ‘Positioning Islamic Finance for the future’.

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