JAKARTA – Syria stands at a pivotal moment in its modern history. After more than a decade of devastating conflict, the nation faces the monumental task of rebuilding an economy that has been reduced to a shadow of its former self. The statistics paint a sobering picture: what was once a $60 billion economy has shrunk dramatically, leaving millions of Syrians in poverty and the country’s infrastructure in ruins.

The challenges are staggering. Power outages stretch for 20 hours daily due to widespread damage to electrical infrastructure. Unemployment has reached alarming levels at 65%, while hyperinflation has eroded purchasing power and deepened the humanitarian crisis. The banking sector, once a pillar of economic stability, collapsed under the weight of sanctions and institutional decay.

Yet amid this devastation, a new chapter is beginning to unfold under President Ahmad al-Sharaa’s administration. The lifting of international sanctions in May 2025 has opened doors that were firmly shut for years, enabling Syria to reconnect with global financial networks and begin the long journey toward economic recovery.

The Islamic Finance Revolution

As Syria charts its path forward, Islamic banking and finance have emerged as cornerstone elements of the reconstruction strategy. This approach is not merely an economic choice but a reflection of the country’s cultural and religious identity, with over 90% of the population being Muslim.

The principles underlying Islamic finance—including risk-sharing partnerships, asset-backed transactions, and the prohibition of interest-based lending—offer a framework that resonates deeply with Syrian society. These Sharia-compliant financial instruments provide alternatives to conventional banking that align with both religious values and practical economic needs.

The Syrian government has made Islamic finance a priority in its reform agenda. Currently, four major Islamic banks operate in the country: Cham Bank, Syria International Islamic Bank, Al Baraka Bank, and National Islamic Bank. Together with conventional institutions offering Islamic windows, these banks manage private assets approaching $3.5 billion.

Recent legislative changes have further strengthened this sector. New laws passed in August 2024 have enabled the government to issue sovereign sukuk—Islamic bonds that comply with Sharia law. The Damascus Securities Exchange has also been revitalized, reopening in June 2025 with a dedicated Sharia index and establishing partnerships with regional financial markets.

Strategic Reforms and Development Initiatives

The transitional government has implemented sweeping economic reforms designed to transition from a centrally controlled system to a more market-oriented economy with Islamic finance integration. Finance Minister Mohammed Abazeed has announced significant public sector salary increases and comprehensive tax reforms aimed at improving government efficiency and revenue collection.

Two major new institutions have been established: a Development Fund providing interest-free loans and a Sovereign Fund dedicated to national infrastructure projects. These entities draw inspiration from successful models in the UAE and Saudi Arabia, adapting them to Syria’s unique circumstances and needs.

Large-scale infrastructure projects are already underway. A massive $7 billion energy consortium involving Qatari, Turkish, and American companies aims to generate 5,000 MW of electrical power, potentially creating 300,000 jobs. The World Bank’s $146 million Syria Emergency Electricity and Power project is working to restore crucial power connections with neighboring Jordan and Turkey.

The revival of oil production, with exports resuming from the Banias refinery in June 2025, signals the beginning of Syria’s energy sector recovery. These developments provide hope for broader economic revitalization and offer concrete opportunities for Islamic finance instruments to support reconstruction efforts.

Regional Partnerships and International Engagement

Syria’s reintegration into the global economy is gaining momentum through strategic partnerships with regional powers and international organizations. The country’s renewed membership in the Islamic Development Bank has opened channels for cooperation with Gulf states, particularly Qatar, Saudi Arabia, and the UAE, which are exploring various forms of re-engagement.

The support from these regional partners has been substantial and immediate. Saudi Arabia has cleared Syria’s outstanding debts to international institutions, while Gulf countries have committed to funding various reconstruction projects. At international forums, including the IMF and World Bank meetings in April 2025, Syrian officials have actively lobbied for broader global reintegration.

The United States has also played a crucial role, with the lifting of sanctions following high-level diplomatic engagement. This shift has enabled Syria to rejoin the SWIFT international banking system and reopened important border crossings, facilitating trade and economic activity.

European engagement has been equally significant, with the EU pledging €2.5 billion at the 2025 Brussels Conference for Syrian reconstruction. The IMF’s visit to Syria in June 2025—the first since 2009—marks a historic step toward institutional rebuilding and international financial cooperation.

Overcoming Persistent Challenges

Despite these positive developments, significant obstacles remain on Syria’s path to economic recovery. Security concerns continue to pose risks to investment, with ongoing tensions in some regions deterring potential investors and complicating reconstruction efforts.

Syria’s placement on the Financial Action Task Force (FATF) grey list raises concerns about anti-money laundering and counter-terrorism financing measures, potentially delaying full banking sector reintegration. These regulatory challenges require sustained attention and reform to restore international confidence.

The country also faces a shortage of expertise in Islamic finance, highlighting the need for comprehensive training and capacity-building programs. Financial literacy among the general population remains limited, potentially hindering the adoption of new banking products and services.

Political fragmentation and the complex legacy of past conflicts continue to complicate trust-building efforts. International organizations emphasize that substantial aid and comprehensive reforms in taxation, monetary policy, and anti-corruption measures are essential for sustainable progress.

Building a Sustainable Economic Future

Looking ahead, Syria has the potential to achieve remarkable economic growth if it successfully implements its reform agenda and leverages Islamic finance effectively. UN estimates suggest the possibility of 13% annual GDP growth through 2030, though returning to pre-war economic levels may take until 2036.

The focus on key sectors including agriculture, textiles, and energy—supported by Islamic financial instruments that ensure ethical foreign direct investment—could significantly reduce the country’s dependence on international aid. Cross-border sukuk arrangements with Gulf partners could provide substantial funding for the $14 billion in infrastructure projects already under development.

For international investors and observers, Syria’s reconstruction offers unique opportunities to participate in ethical, Sharia-compliant investments that prioritize community development and transparent governance. The integration of Islamic finance principles helps ensure that economic growth is not only rapid but also inclusive and sustainable.

The path forward requires continued commitment to reforms, international cooperation, and the careful implementation of Islamic finance solutions that serve both economic and social objectives. Syria’s rebirth depends on building not just physical infrastructure but also institutional trust and financial systems that reflect the values and aspirations of its people.

As this historic reconstruction unfolds, the success of Islamic finance in Syria could serve as a model for other post-conflict societies seeking to rebuild their economies while maintaining their cultural and religious identity. The stakes are high, but so is the potential for transformation and renewal.

Original article:

halaltimes.com. (n.d.). How Islamic Finance Can Rebuild Syria’s Economy After Conflict. Retrieved August 14, 2025, from https://www.halaltimes.com/how-islamic-finance-can-rebuild-syrias-economy-after-conflict/