ZAWYA: Tokenization and digital sukuk set to transform GCC capital markets

Bindu Rai

As digital transformation accelerates in the GCC, innovative formats are reshaping the structure of Islamic bonds. Tokenised sukuk, AI-enabled Shariah-compliant tools, and blockchain-based settlements are set to redefine capital raising in the region, according to Fitch.

“Countries in the GCC are already exploring what we can really do with digitization. We have seen it recently, with the UAE introducing the retail sukuk programme. Saudi Arabia did the same a few years back,” Bashar Al Natoor, Managing Director and Global Head of Fitch Ratings’ Islamic Finance Group, said.

Tokenization allows for fractional ownership of Islamic bonds and their instant exchange on the blockchain. According to Natoor, tokenization in the sukuk space is gathering momentum, but he called it a gradual transformation.

“I think it’s more a medium to long term story, and the adoption will be fragmented. Things will depend on how much the regulators will allow and how much the stakeholders are willing to adopt to that. And when it comes to Islamic finance, we also have to consider ‘do we have the green light to go with this type of transaction, or not?’ It’s untested yet, but we are closely watching this space.”

Natoor said the same applies to the ESG and sustainability sukuk space. “However, does this mean we are

going to see a blue sukuk tomorrow akin to a blue bond? Perhaps not, but we do expect this trend to continue in the ESG sukuk space as well in the GCC,” he added.

Smart sukuk initiatives

A digital revolution for Islamic finance in the GCC could not come at a more suitable time, with Fitch Ratings expecting the region’s debt capital market (DCM) activity to remain strong into 2026, supported by a healthy pipeline, as outstanding volumes surpassed $1 trillion in the third quarter of 2025.

Bahrain was among the first to bring blockchain to Islamic finance with its wealth technology startup Inablr building a blockchain-based investment platform in 2021 that enabled clients to own bonds and sukuk with an initial investment of $1,000. The startup was backed by the central bank’s regulatory sandbox.

The retail sukuk initiative in the UAE allows individual investors to invest in government-backed Treasury Sukuk (T-Sukuk) through fractionalized digital investment platforms of participating banks in the country, starting from 4,000 UAE dirhams ($1,089). Abu Dhabi Islamic Bank (ADIB) became the first UAE lender to roll out a ‘Smart Sukuk’ initiative earlier this month.

In Saudi Arabia, the Capital Market Authority (CMA) and the Saudi Central Bank – SAMA have introduced initiatives to help fintechs in this space.

In July, Tali Ventures, the venture capital arm of the STC group, led an undisclosed funding round in Tarmeez Capital, a Saudi fintech player in the sukuk and debt instruments space.

Fitch expects full-year 2025 global sukuk issuance to surpass 2024 levels, with about $80 billion of sukuk issued in the first three quarters in the core markets of the GCC countries, Malaysia, Indonesia, Türkiye and Pakistan, up 22% quarter on quarter and 89% year-on-year.

(Reporting by Bindu Rai, editing by Seban Scaria)

bindu.rai@lseg.com

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