Islamic Finance Industry: Single-Digit Growth Projected in 2024-2025 with $160-$170 Billion Sukuk Issuance and Digitalization Trends
The Islamic finance industry is projected to experience single-digit growth and reach total assets of around $2.5 trillion in 2024-2025, according to a report.
Sukuk issuance is expected to be between $160 billion and $170 billion in 2024.
The industry grew by 8% in 2023 and 8.2% in 2022, driven by growth in banking assets and the sukuk industry.
Islamic banking assets increased by 56% in 2023, with financial institutions in the Gulf Cooperation Council region accounting for 86% of the reserve increase, with Saudi Arabia being the largest contributor.
The Islamic finance industry is expected to continue growing due to the implementation of Vision 2030 and corporate lending in the UAE.
The non-oil sector's good performance in the UAE contributed to a stronger showing in 2023.
Turkey and Indonesia also experienced growth, but the performance in Malaysia and Turkey was affected by currency depreciation in the ringgit and lira, respectively.
The issuance of Shariah-compliant debt products, or sukuk, began strongly in 2024 with Saudi Arabia being a significant contributor.
The decrease in issuance volumes in 2023, caused by tighter liquidity conditions in Saudi Arabia and Indonesia's lower fiscal deficit, was partially offset by an increase in foreign currency-denominated sukuk issuance.
The sukuk market, a part of the Islamic finance industry, had a strong start in 2024 with total issuance reaching $46.8 billion by March 31, up from $38.2 billion in the same period last year.
The growth is attributed to high financing needs in core Islamic finance countries, particularly in Saudi Arabia, due to ongoing economic transformation programs.
The report also suggests opportunities in the structured finance space for banks to refinance their mortgage books using sukuk.
However, the drive for digitalization and sustainability initiatives in the Islamic finance industry has shown mixed results, with significant opportunities but slow progress in comparison to the global context.
The report by S&P Global highlights the positive impact of digitalization on the banking sector of Islamic finance.
The future of Islamic finance is predicted to be sustainable due to its alignment with Shariah principles and sustainability goals.
It will also be collaborative as stakeholders aim to preserve industry equilibrium and build on past achievements.
Digitalization is expected to enhance efficiency and increase value proposition for investors and issuers, according to the analysis.
Additionally, Fitch Ratings reported a 10% yearly expansion of global outstanding sukuk, reaching $867 million in Q1 2024.
The Islamic debt product, known as sukuk, has experienced growth due to funding and refinancing needs and the advancement of the debt capital market in the Gulf Cooperation Council (GCC) region, according to a credit rating agency report.
However, potential challenges such as new Shariah requirements that may alter credit risk, geopolitical uncertainties, and high oil prices could negatively impact the growth of the sukuk market in 2023.
The industry grew by 8% in 2023 and 8.2% in 2022, driven by growth in banking assets and the sukuk industry.
Islamic banking assets increased by 56% in 2023, with financial institutions in the Gulf Cooperation Council region accounting for 86% of the reserve increase, with Saudi Arabia being the largest contributor.
The Islamic finance industry is expected to continue growing due to the implementation of Vision 2030 and corporate lending in the UAE.
The non-oil sector's good performance in the UAE contributed to a stronger showing in 2023.
Turkey and Indonesia also experienced growth, but the performance in Malaysia and Turkey was affected by currency depreciation in the ringgit and lira, respectively.
The issuance of Shariah-compliant debt products, or sukuk, began strongly in 2024 with Saudi Arabia being a significant contributor.
The decrease in issuance volumes in 2023, caused by tighter liquidity conditions in Saudi Arabia and Indonesia's lower fiscal deficit, was partially offset by an increase in foreign currency-denominated sukuk issuance.
The sukuk market, a part of the Islamic finance industry, had a strong start in 2024 with total issuance reaching $46.8 billion by March 31, up from $38.2 billion in the same period last year.
The growth is attributed to high financing needs in core Islamic finance countries, particularly in Saudi Arabia, due to ongoing economic transformation programs.
The report also suggests opportunities in the structured finance space for banks to refinance their mortgage books using sukuk.
However, the drive for digitalization and sustainability initiatives in the Islamic finance industry has shown mixed results, with significant opportunities but slow progress in comparison to the global context.
The report by S&P Global highlights the positive impact of digitalization on the banking sector of Islamic finance.
The future of Islamic finance is predicted to be sustainable due to its alignment with Shariah principles and sustainability goals.
It will also be collaborative as stakeholders aim to preserve industry equilibrium and build on past achievements.
Digitalization is expected to enhance efficiency and increase value proposition for investors and issuers, according to the analysis.
Additionally, Fitch Ratings reported a 10% yearly expansion of global outstanding sukuk, reaching $867 million in Q1 2024.
The Islamic debt product, known as sukuk, has experienced growth due to funding and refinancing needs and the advancement of the debt capital market in the Gulf Cooperation Council (GCC) region, according to a credit rating agency report.
However, potential challenges such as new Shariah requirements that may alter credit risk, geopolitical uncertainties, and high oil prices could negatively impact the growth of the sukuk market in 2023.
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Translated by AI
