How Islamic Finance Can Rebuild Syria’s Economy After Conflict

The Syrian economy lies in ruins after thirteen years of protracted conflict, with the World Bank estimating reconstruction costs surpassing $400 billion. Traditional financing mechanisms have proven inadequate due to international sanctions, a collapsed banking sector, and hyperinflation exceeding 140%. In this critical juncture, Islamic finance emerges as a transformative solution, offering

Syria’s economy has been ravaged by war, sanctions, and corruption under the Assad regime. Pre-2011, the country boasted a GDP of around $60 billion, bolstered by oil production (383,000 barrels per day), agriculture, and manufacturing. Today, GDP has contracted to a fraction, with extreme poverty affecting one in four Syrians and unemployment soaring to 65%. Infrastructure is in tatters: 70% of power plants and transmission lines damaged, leading to blackouts lasting up to 20 hours daily. Sanctions, imposed for human rights violations, hollowed out institutions, reducing tax revenue to GDP from 11% to 5% by 2021.

The new administration under President Ahmad al-Sharaa (formerly of Hayat Tahrir al-Sham, HTS) inherited a liquidity crisis, with the Central Bank holding just $200 million in reserves—down from $17 billion in 2010. Inflation hit triple digits, and the Syrian pound plummeted, exacerbating food insecurity for 13.1 million people. However, positive shifts are underway: Sanctions were lifted in May 2025, enabling Syria’s first post-conflict SWIFT transfer and reopening borders like Nasib with Jordan. The World Bank forecasts modest 1% GDP growth in 2025, contingent on security and foreign investment.

For readers navigating this landscape, understanding these baselines is crucial—reconstruction isn’t just about bricks and mortar; it’s about restoring trust in a system plagued by cronyism and illicit activities like Captagon production under Assad.

The Role of Islamic Finance in Syria’s Reconstruction

Islamic finance, rooted in Shariah principles like risk-sharing and prohibition of interest (riba), is uniquely positioned to drive Syria’s recovery. With Muslims comprising over 90% of the population, it offers culturally resonant tools such as sukuk (Islamic bonds), mudarabah (profit-sharing partnerships), and murabaha (cost-plus financing).

In 2025, the Syrian government has prioritized Islamic banking as a core reform. Four Islamic banks—Cham Bank, Syria International Islamic Bank, Al Baraka Bank, and National Islamic Bank—operate alongside conventional ones, with private banking assets nearing $3.5 billion. New legislation in August 2024 enabled sovereign sukuk issuances, and Islamic windows in conventional banks now offer Shariah-compliant services. The Damascus Securities Exchange, reopened in June 2025 with a Shariah index, signed a cooperation deal with Saudi Tadawul Group.

Experts like Dr. Abdelilah Belatik of CIBAFI advocate a phased approach: Start with foundational reforms, then issue sukuk for infrastructure to attract FDI. Regional ties are key—Syria’s reinstated IsDB membership opens doors to Qatar, Saudi Arabia, and UAE, who are exploring Islamic finance for re-engagement. Gulf-owned banks like Al Baraka (Bahrain) and Cham (Kuwait) provide operational leverage.

For investors, this means opportunities in halal-compliant projects: From funding solar farms to housing reconstruction, Islamic finance ensures ethical growth, reducing corruption risks through transparency mandates.

Recent Reforms and Initiatives Boosting Islamic Finance

Syria’s transitional government is pivoting to a market-oriented economy with Islamic elements. Finance Minister Mohammed Abazeed announced a 400% public sector salary hike by February 2025 and tax overhauls for efficiency. Decrees in July 2025 established a Development Fund for interest-free loans and a Sovereign Fund for national projects, mirroring UAE and Saudi models.

Major deals include a $7 billion energy consortium with Qatari, Turkish, and US firms for 5,000 MW of power, creating 300,000 jobs. The World Bank’s $146 million SEEP project revives power links with Jordan and Turkey. Oil exports resumed in June 2025 from Banias refinery, signaling hydrocarbon revival.

Islamic finance integrates here via sukuk for infrastructure and partnerships with Gulf institutions. Saudi Arabia cleared Syria’s $15 million World Bank debt, unlocking grants. At the IMF/World Bank spring meetings in April 2025, Syrian officials lobbied for global reintegration.

Helpful tip for readers: If you’re an investor, monitor IsDB and AAOIFI for compliance standards—Syria’s Shariah board is under review to enhance credibility.

Challenges Facing Islamic Finance in Syria

Despite progress, hurdles remain. Security risks, including clashes in Suwayda and SDF control of oil fields, deter investment. Syria’s FATF grey list status raises AML/CFT concerns, delaying banking reintegration. Limited expertise and financial literacy hinder adoption—AAOIFI’s Mohammad Majd Bakir calls for regional training.

Political fragmentation and past HTS ties complicate trust-building. IMF warns substantial international aid is needed, with reforms in taxation, monetary policy, and anti-corruption essential.

To overcome these, experts recommend inclusive dialogue and gradual privatization to avoid cronyism. For readers concerned about risks, diversify through multilateral funds like UNDP’s $1.3 billion plan.

International Support and Regional Partnerships

Global engagement is accelerating. The US lifted sanctions in May 2025 after Trump’s meeting with al-Sharaa, praising his pragmatism. Saudi and Qatar paid World Bank arrears, while GCC views Syria’s stability as a “security necessity.”

Turkey eyes energy studies, and the EU pledged €2.5 billion at the 2025 Brussels Conference. IMF visited Syria in June 2025—the first since 2009—to roadmap institutional rebuilding.

Islamic finance amplifies this: Cross-border sukuk with Gulf partners could fund $14 billion in infrastructure deals signed in August 2025, including Damascus airport revamp.

 A Path to Sustainable Growth

With the right blend of Islamic finance and reforms, Syria could achieve 13% annual GDP growth until 2030, per UN estimates, though pre-war levels may take until 2036. Focus on agriculture, textiles, and energy—leveraging Islamic tools for ethical FDI—could reduce aid dependency.

For readers, stay informed via resources like Salaam Gateway or World Bank reports. Engage ethically: Support halal investments that prioritize community upliftment. Syria’s rebirth hinges on inclusive, transparent finance—Islamic principles could ensure it’s not just rebuilt, but resilient.