Global sukuk issuance up in 2018 as Sharia-compliant finance grows

Malaysia, Saudi Arabia, UAE dominate the sukuk market, a report from Bahrain’s IIFM says

Malaysia, Saudi Arabia, UAE dominate the sukuk market in 2018. Reuters

Global sukuk issuance increased 5.5 per cent to $123.2 billion (Dh451bn) in 2018 as against $116.7 bn in 2017, according to the latest report from Bahrain-based International Islamic Financial Market (IIFM).

The report also notes that countries like Malaysia, Saudi Arabia, UAE, Indonesia and Bahrain dominate the global sukuk market while Turkey, Pakistan, Qatar, Oman and regions such as Africa in particular are likely to gradually increase their market share in the coming years.

“Sukuk’s commercial success should not lead us to ignore the underlying principles which are its distinguishing factors when compared to conventional bonds. Sukuk are an innovative way to raise financing in a Sharia compliant manner with link to the real economy,” said Khalid Hamad Abdulrahman Hamad, Chairman of IIFM.

“IIFM’s current initiatives on standardizing Sukuk Al Ijarah and Sukuk Al Mudarabah suite of documentation will address some of the critical issues which surfaced in recent cases of Sukuk defaults and restructuring.”

There has been a continued growth in sukuk issuance from sovereign issuers while the quasi-sovereign, corporate and financial institution issuance also remained stable contributing to an optimistic outlook for the sukuk market.

The study also identifies global sukuk (with issue size of $100m or above and with tenor of more than a year) set to mature during 2019 and 2020 will be around $73.34 bn.

Sukuk market is also likely to benefit from technological advancements in the area of FinTech (Financial Technology) and blockchain technology, according to Ijlal Ahmed Alvi, chief executive of IIFM.

“It is pleasing to note that the new issuances also include environmentally friendly Green Sukuk, Socially Responsible sukuk and blockchain related sukuk.”

A recent report from Deloitte also said that Islamic finance can play a significant role in financing solar and other alternative energy projects in the Middle East as countries put an emphasis on green energy to meet increasing demand.