The UAE has brought Islamic financial institutions and takaful providers under a single, detailed regulatory regime.
According to Pinsent Masons, the change is designed to give market participants firmer legal footing when they build and run sharia-compliant products, and it could force many firms to revisit agreements they already have in place.
The rules sit in Central Bank Regulation No. 1/2026, which puts parts of Federal Decree-Law No. 50/2022 into effect. They cover a wide set of Islamic finance structures, including murabaha, ijarah, salam, istisna’a, mudaraba, musharaka and wakala. They also extend to Islamic deposits, investment accounts, guarantees, documentary credits and takaful products.
Many groups will feel the effect. Islamic banks and finance companies in the UAE fall within scope, as do conventional lenders that run Islamic “windows”.
Takaful and retakaful operators are covered, along with corporate borrowers and project sponsors that rely on Islamic funding structures. Investors in sharia-compliant financing and investment schemes are also affected.
The regulation seems to gather principles that had previously applied to Islamic transactions and set them down within a formal supervisory structure. That shift puts in-house legal, compliance, risk and sharia governance teams at the centre of the response, since the rules aim to set a clearer foundation for both institutions and transactions.
The reform is part of a broader overhaul of Islamic finance supervision in the UAE. Earlier this year, the Dubai Financial Services Authority (DFSA) widened its Islamic Finance Rules (IFR). The expanded rules now cover more sharia-compliant securities offerings and Islamic funds, which tightens oversight of Islamic capital markets activity within the Dubai International Financial Centre (DIFC).
The revisions followed the DFSA’s consultation paper CP172. Under them, firms that present products as Islamic or sharia-compliant may have to meet DFSA standards on governance, disclosure and sharia compliance processes. Issuers raising capital through Islamic instruments, managers of Islamic investment funds and sponsors structuring or promoting such products across the region are expected to be most affected.
Pinsent Masons Islamic finance expert Seya Rahnema said, “The regulation represents an important development in the UAE’s Islamic finance framework. By setting out detailed rules governing a wide range of Islamic finance products and structures, it should enhance legal and regulatory certainty for market participants and support greater consistency in the way transactions are structured and documented.”
He added, “The breadth of products covered by the regulation means businesses involved in Islamic finance transactions may need to review existing arrangements to assess whether updates to documentation, governance processes or compliance frameworks are required.”
Rahnema also said, “One of the most significant aspects of the regulation is the extent to which it codifies principles applicable across different forms of Islamic finance. Greater regulatory clarity can help facilitate market growth by providing increased confidence for institutions, investors and counterparties when entering into sharia-compliant arrangements.”
Pinsent Masons financial regulation expert Marie Chowdhry said, “Firms should review whether existing or planned sharia-compliant securities offerings or Islamic fund offerings are now subject to the IFR and assess internal compliance frameworks, governance arrangements and disclosure documentation against the updated rules.”
Chowdhry added, “Businesses should also consider whether offering documents, marketing materials and sharia governance processes require updating. Legal and regulatory advice will likely be required where products may newly fall within the expanded scope of the IFR.”
Copyright © 2026 RegTech Analyst
Copyright © 2026 RegTech Analyst
