Labuan Strengthens Ties with Middle East Financial Firms Through Islamic Finance Opportunities
Kuala Lumpur, Malaysia — October 2025.
Labuan International Business and Financial Centre (Labuan IBFC) is increasingly positioning itself as a preferred destination for Middle East investors and financial institutions seeking an international base in Asia. Its well-developed Islamic finance framework, efficient licensing procedures, and strategic orientation toward cross-border participation make it a natural choice for entities engaged in investment banking, securities trading, and forex brokerage.
Industry observers note that advisory firms such as Zitadelle Advisory Group, which specialize in regulatory licensing and compliance services, have seen growing demand from Gulf-based clients exploring Labuan as a strategic hub for regional expansion.
A jurisdiction aligned with Islamic finance principles
Labuan operates under a dual legislative structure that supports both conventional and Islamic financial activities. The Labuan Islamic Financial Services and Securities Act 2010 (LIFSSA) provides the legal foundation for Shariah-compliant investment banking, money broking, and fintech initiatives.
Recent developments underscore Labuan’s proactive stance. As reported by The Edge Malaysia, the Labuan Financial Services Authority (Labuan FSA) has granted conditional approvals for two Islamic digital banks under its sandbox framework — a clear sign of its commitment to advancing Shariah-compliant digital finance while maintaining sound regulatory oversight.
This balance between innovation and compliance offers confidence to Middle East investors who seek alignment with Islamic finance principles when expanding internationally.
Why mid-east-based firms should consider setting up a financial services entity in Labuan (Malaysia)
Why Labuan appeals to Middle East investors
- Shariah-aligned environment – The legislative structure enables firms to operate in accordance with Islamic finance standards, ensuring credibility for Gulf-based entities.
- Strategic Asia-Middle East bridge – Labuan’s geographical and time-zone positioning allows access to both ASEAN and GCC markets.
- Efficient and cost-effective licensing – Application timelines and capital requirements remain favorable compared to onshore jurisdictions, making Labuan a practical base for global operations.
- Regulatory openness – The Labuan FSA’s willingness to accommodate Islamic fintech, digital banking, and asset management initiatives reflects its long-term vision to attract investors from the Middle East.
Example of growing Islamic digital banking
In a recent move that gained attention across regional finance circles, Labuan FSA approved the establishment of Islamic digital banks within its “i-BOX sandbox” regime. This initiative demonstrates how the jurisdiction is evolving into a global centre for Islamic fintech and banking innovation — creating clear opportunities for equity participation, joint ventures, and licensed operations for Middle East financial groups.
Zitadelle Advisory Group supports international applicants
Zitadelle Advisory Group AG provides regulatory and compliance support for financial institutions pursuing licences under the Labuan Financial Services Authority (FSA).
Its services include:
- Structuring and applying for investment banking, securities trading, and money broking licences
- Advising on Shariah-compliant setups under the LIFSSA framework
- Preparing governance, AML/CFT, and compliance documentation
- Managing liaison with Labuan FSA throughout the approval process
With offices in Europe and Asia, Zitadelle AG bridges Middle East investors with Labuan’s regulatory environment, ensuring that each application meets both Shariah and international standards.
Looking ahead
As digital transformation reshapes financial markets, Labuan’s Islamic finance legislation and investor-friendly policies are positioning it as a vital link between Asia and the Middle East. For Gulf-based firms aiming to expand their regulated presence into Asia-Pacific, the jurisdiction offers a unique combination of flexibility, cost efficiency, and credibility.
