The UAE’s trade finance sector is expanding rapidly, driven by a strong economy, growing trade flows, and a surge of commodity merchants entering the market. Local banks are reporting

steady growth in lending and fee income, though competition from new entrants is squeezing margins.

Construction and diversification fuel demand

Across the Emirates, construction projects for skyscrapers, infrastructure, and commercial buildings are spurring imports of steel, aluminium, and cement. At the same time, exports are increasing as the country’s long-running diversification push reduces its reliance on oil.

The UAE’s role as a global trade hub also plays a part. Free trade zones across the country host thousands of companies that leverage the nation’s location to reroute goods, particularly between Asia and Africa.

Banks see strong growth

Local lenders are benefitting from the surge. Trade loan volumes, fee income, and products such as letters of credit (LCs) and guarantees are all on the rise, with Islamic trade financing also gaining traction.

“The Middle East – especially the GCC – is the best performing sub-region globally for trade finance, and the UAE is at its core,” says Avinash Bhatia of Crisil Coalition Greenwich.

First Abu Dhabi Bank (FAB), the country’s largest lender, grew trade loan volumes by AED12.77bn (US\$3.47bn) in Q1 2025, reaching AED63.26bn – nearly double its 2020 figure. FAB attributes this to strong supply chain and receivables finance growth, as well as reserve-based lending tied to oil and gas assets. Its trade contingencies hit AED177.95bn at the end of 2024.

Emirates NBD follows with AED97.14bn in trade contingencies, while Abu Dhabi Commercial Bank (ADCB) has seen LCs and guarantees more than double since 2018, hitting AED86.3bn in 2024. Fee and commission income is also climbing: Emirates NBD passed AED1bn in 2023 and added another AED100mn last year, while FAB posted a 17.3% increase to AED1bn in 2024.

Policy and private sector drive expansion

Hamayoun Khan of Commercial Bank of Dubai (CBD) credits both government strategy and private-sector growth. Trade deals with India, Indonesia, and Turkey, along with Dubai’s target to double GDP by 2033, are helping fuel momentum. He notes that many of the tens of thousands of companies set up in recent years have now “graduated to a certain scale,” contributing meaningfully to GDP and trade volumes.

LCs remain the dominant product, but construction demand is pushing up guarantees as well.

Competition intensifies

The UAE’s appeal is drawing more foreign banks, particularly those serving the Asia-UAE corridor. Coalition Greenwich’s Ruchirangad Agarwal notes that corporates are working with a broader range of lenders, including new Chinese and Japanese players.

Longstanding institutions like HSBC and Standard Chartered face growing competition from banks across Europe, North America, Asia, and Africa, including Maybank, Access Bank, State Bank of India, and Malta’s Fimbank.

With new entrants offering cheap liquidity and fee waivers to win clients, competition is heating up. “The market is very, very competitive,” says CBD’s Khan. “Many banks are chasing the same corporate and institutional wallets.” Photo by trolvag, Wikimedia commons.