Riyadh: Islamic Finance Industry Poised for Global Growth
The Islamic finance industry is gearing up for significant growth on a global scale in the upcoming years, with total assets expected to experience single-digit growth driven by efforts in economic diversification, as reported by a recent study.
Predicted Sukuk Issuance and Industry Growth
Projections indicate that global sukuk issuance will range between $160 billion and $170 billion in 2024, maintaining a steady momentum from $168.4 billion in 2023 to $179.4 billion in 2022.
Industry Growth Trends and Regional Contributions
According to the latest analysis by credit rating agency S&P Global, the Islamic finance industry saw growth rates of 8 percent in 2023 and 8.2 percent in 2022, fueled by expansions in banking assets and the sukuk industry.
Financial institutions in the Gulf Cooperation Council region accounted for 86 percent of the reserve increase in 2023, with Saudi Arabia emerging as a significant contributor, responsible for 56.7 percent of the maturation.
Future Outlook and Growth Drivers
With the implementation of Vision 2030 and the expected growth in corporate and mortgage lending, the Islamic finance industry is anticipated to receive continued support over the next 12-24 months. The UAE is also showing a stronger contribution, thanks to the non-oil sector’s performance in 2023.
Growth trends were observed in countries like Turkiye and Indonesia, while Malaysia and Turkiye faced some challenges due to currency depreciation. The issuance of Shariah-compliant debt began on a strong note in 2024, with Saudi Arabia playing a crucial role in driving performance.
Market Performance and Digitalization Initiatives
As the sukuk market kicks off 2024 with vigor, reaching $46.8 billion by March 31, the industry is expected to maintain its growth momentum in the near term. Financing needs in core Islamic finance countries remain high, especially in countries like Saudi Arabia undergoing economic transformation programs.
S&P Global highlighted the impact of digitalization and sustainability initiatives on the Islamic finance industry, emphasizing the opportunities and challenges presented by these trends.
Conclusion: Sustainable, Collaborative, and Digital Future
The study concluded that the future of Islamic finance is poised to be sustainable, collaborative, and digital. With a focus on aligning Shariah principles with sustainability goals and embracing digital advancements, the industry is set to evolve in a dynamic and inclusive manner.
Fitch Ratings also noted the expansion of global outstanding sukuk by 10 percent year on year, reaching $867 million by the end of the first quarter of 2024. The growth was attributed to funding needs and the development of the debt capital market in the GCC region, despite potential challenges posed by new Shariah requirements and geopolitical uncertainties.