Global sukuk issuances surged 39% to $250bn in 2021

Indonesia, Malaysia, the GCC countries, Turkey and Pakistan have the most new issuances

Only 2 per cent of the total issuances was linked to Environmental, Social and Governance factors, compared to 6.5 per cent in global bond markets. Reuters
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Global sukuk or Islamic bond issuances surged 39 per cent to reach $250 billion in 2021 and continue to grow this year as economies recover from the coronavirus pandemic, according to a report.

The majority of issuances came from Indonesia, Malaysia, the GCC countries, Turkey and Pakistan, the Institute of International Finance said.

“Market activity continues to grow, global sukuk issuance was near $40bn in Jan/Feb 2022, over 7 per cent higher than the same period in 2021,” the IIF said.

However, only 2 per cent ($5bn) of the total issuances was linked to Environmental, Social and Governance (ESG) factors, compared to 6.5 per cent in global bond markets.

Expansion of ESG-linked sukuk was fastest in Indonesia, Malaysia, Saudi Arabia and the UAE, with corporations issuing $6bn worth of ESG sukuk since 2016. About 80 per cent of the total cumulative issuance has been in US dollars, 15 per cent in Malaysian Ringgit and the rest in euros.

“The investor base for ESG sukuk is fairly diversified as demand remains strong. At present, investment advisers, sovereign wealth funds and banks are the top holders of ESG sukuk, with most of the registered investors based in the US, Luxembourg and Ireland,” the report said.

Indonesia, the most populous Muslim country in the world, has the largest green sukuk market (proceeds are applied for climate and environmental projects), according to the IIF. Since 2017, Indonesia, Malaysia, Saudi Arabia, the UAE and the Jeddah-based Islamic Development Bank have issued $9bn worth of green sukuk.

Sustainability-linked sukuk issuances also rose last year as the importance for green and social impact projects grows amid efforts by countries to transition to a greener economy. Total sustainability sukuk issuance jumped to $3.7bn in 2021 from $1.6bn in the previous year. Malaysia, Saudi Arabia and the Islamic Development Bank have raised more than $6bn from sustainability sukuk markets since the end of 2016, the report said.

In 2020, Etihad Airways raised $600 million through the first sustainability-linked sukuk to support its carbon reduction targets.


“The slow pickup of ESG-linked issuance in global sukuk markets largely reflects the limited project pipeline and challenges in identifying projects and assets that meet relevant ESG criteria,” the report said.

“A lack of knowledge at the issuer and investor level about the process and benefits is another important impediment to market expansion.”

High issuance costs are also curbing the potential issuer appetite, according to the report.

“Looking forward, foreign investor demand for ESG-linked debt should support issuance activity in ESG-linked sukuk markets. However, higher oil prices, inflated after Russia’s invasion of Ukraine, should reduce Gulf countries’ funding needs and will likely lessen the supply of bond and sukuk issuance this year.”


A number of companies from the GCC issued sukuk last year to meet their funding needs as they tapped into low interest rates globally. Saudi Aramco, the world’s largest oil exporting company, raised $6bn with a debut sukuk in June, while Acwa Power raised $746m.

First Abu Dhabi Bank, the UAE's biggest bank by assets, as well as Kuwait’s Warba Bank, secured funding through Islamic bonds. They raised $500m and $250m respectively.

Global sukuk issuances rose by 36.1 per cent in 2021 to $252.3bn and are expected to continue growing this year on the back of robust Islamic investor appetite, a separate report by Fitch Ratings said.

Goals to diversify funding and Islamic finance development agendas are also boosting sukuk issuance in the region.

Updated: March 18, 2022, 9:13 AM