UAE Central Bank Introduces Comprehensive Islamic Finance Regulatory Framework

The United Arab Emirates has introduced a comprehensive regulatory framework governing Islamic financial institutions and takaful providers, as set out in Central Bank Regulation No. 1/2026, law firm Pinsent Masons reported. The regulation implements aspects of Federal Decree-Law No. 50/2022 and establishes detailed rules codifying and consolidating principles applicable to Islamic financial transactions within a formal regime.

The framework establishes detailed rules governing multiple Islamic finance structures and transactions, including murabaha, ijarah, salam, istisna'a, mudaraba, musharaka, and wakala arrangements. It also governs Islamic deposits, investment accounts, guarantees, documentary credits, and takaful products.

According to Pinsent Masons, the regulation applies to Islamic banks and finance companies operating in the UAE, conventional banks providing Islamic banking services via Islamic windows, takaful and retakaful operators, corporate borrowers and project sponsors using Islamic structures, and investors in sharia-compliant arrangements.

Seya Rahnema, an Islamic finance expert at Pinsent Masons, stated that the rules should enhance legal and regulatory certainty and support greater consistency in transaction structuring and documentation. Rahnema added that businesses involved in Islamic finance transactions may need to review existing arrangements, documentation, governance processes, and compliance frameworks.

Marie Chowdhry, a financial regulation expert at Pinsent Masons, noted that firms should evaluate whether existing or planned sharia-compliant securities or Islamic fund offerings fall under the updated rules and assess disclosure documentation, marketing materials, and internal governance accordingly.