Strategic approaches to Islamic mutual funds in Saudi Arabia: a survey on trends, ethical investments and technological innovations

Purpose This paper aims to conduct a comprehensive literature-based analysis of the mutual fund industry in Saudi Arabia, with a particular emphasis on the strategic development and ethical positioning of Islamic mutual funds (IMFs). It critically explores the evolution, distinguishing principles and emerging trends in both Islamic and conventional mutual funds, applying a comparative analytical lens. Design/methodology/approach This study uses a literature survey methodology, which largely directs its attention to the overall aspect of the Islamic mutual fund (IMF) sector specifically within Saudi Arabia. For data collection, this research examined the referred articles, historical records and empirical evidence on Islamic finance and mutual funds. This work involved a comprehensive investigation on the evolution of mutual funds and, more specifically, the growth of Islamic mutual funds in the Saudi market. Furthermore, the study conducted a comparative analysis to differentiate the characteristics and operating principles of Islamic mutual funds (IMFs) and conventional mutual funds (CMFs). The paper aimed to organize a robust framework to understand the unique issues of the IMF while acknowledging the limitations of the available literature. Findings The findings of this study revealed a robust growth within the Saudi mutual fund sector, supported by strengthened regulatory frameworks and increasing investor participation, with total assets under management reaching SAR 1.1tn by early 2025. This growth reflects the dynamic nature of investment preferences and the increasing relevance of Shariah-compliant financial products. Research limitations/implications This study underscores the significant potential of further expansion of Islamic mutual funds in Saudi Arabia. It highlights the importance of robust growth in the Saudi mutual fund sector, with total assets under management reaching SAR 1.1tn by early 2025. The study also underlines the strategic role of Saudi Arabia’s mutual fund industry in promoting financial inclusion and supporting sustainable economic development, in line with the country’s Vision 2030 objectives. By highlighting the ethical and faith-based dimensions of Islamic mutual funds, the research suggests these products have strong appeal for investors seeking responsible investment options aligned with Islamic principles. Originality/value This research provides valuable insights into the growth potential and strategic importance of Islamic mutual funds in the financial landscape of Saudi Arabia. The study highlights the industry’s alignment with national development goals and its appeal to ethically minded investors. In the Saudi Arabia’s context, the existing literature in this context contains several unexplored areas. The findings of this study offer a foundation for policymakers, financial institutions and investors to make informed decisions regarding Islamic mutual funds in the Saudi market.