Saudi Arabia is largest Islamic finance market with $826bn in assets, Sama governor says

The kingdom is also the world's biggest issuer of sovereign sukuk and its co-operative insurance sector is the fastest growing worldwide

The King Abdullah Financial District in Riyadh. Saudi Arabia. The Islamic banking sector in the kingdom accounts for 33 per cent of global Islamic bank assets. Bloomberg

Saudi Arabia, the top Arab economy, is the world’s largest Islamic finance market with total assets across sectors exceeding 3.1 trillion Saudi riyals ($826.7 billion), the governor of the Saudi Central Bank (Sama) has said.

The kingdom is also the largest global issuer of sovereign sukuk, or Sharia-compliant Islamic bonds, and its co-operative insurance sector is the fastest growing worldwide, approaching 27 per cent growth in 2022, Ayman Al Sayari said in remarks carried by the Saudi Press Agency.

“Saudi Arabia has a deep-rooted and historical relationship with Islamic finance [and] it houses the largest Islamic finance market in the world,” Mr Al Sayari said at an Islamic Financial Services Board symposium in Riyadh.

“The Islamic banking sector alone accounts for 33 per cent of the global Islamic bank assets."

Globally, the Islamic finance market has expanded at a brisk pace, recording an average annual growth of 9.6 per cent over the past three years, as the value of assets reached more than 11.2 trillion riyals, the governor, who is also the chairman of the IFSB Council said.

The Islamic finance industry is expected to grow by around 10 per cent this year and next despite a slowing global economy, mainly led by the GCC countries, S&P Global Ratings said in a report in May.

The sector continued to expand in 2022, with assets up by 9.4 per cent compared with 12.2 per cent in 2021, supported by growth in banking assets and the sukuk industry, S&P said.

Saudi Arabia and Kuwait drove growth in Islamic banking assets last year.

Saudi Arabia has a deep-rooted and historical relationship with Islamic finance [and] it houses the largest Islamic finance market in the world

Ayman Al-Sayari,
Governor, Sama

In Saudi Arabia, Opec’s biggest oil exporter, the implementation of its ambitious diversification strategy, Vision 2030, continued growth economic momentum and growth in mortgage lending supported the Islamic Finance industry's expansion.

However, in other parts of the world, growth was either muted or held back by local currency depreciation, according to the S&P report.

Global sukuk issuance is forecast to “level off” in the range of $170 billion to $175 billion in 2023, after a 10 per cent fall in 2022 to $178 billion, Moody’s Investors Service said in a research report in March.

Although Saudi Arabia and Malaysia will continue to lead global sukuk issuances, the potential for growth in other jurisdictions also remains high, Moody’s said.

Long-term sovereign sukuk issuance will also stabilise in 2023 after two years of declines at around $80 billion, before rising to $85 billion in 2024.

Demand for Sharia-compliant financing is set to outpace conventional funding in 2023, driven by strong economic growth and development agendas in key markets, Moody’s said in March.