The Future of Islamic Finance: A Prognosis for Growth and Sustainability
In an exciting projection for the global Islamic finance industry, experts anticipate a surge in growth by 2024-2025. The sector’s total assets are expected to experience a single-digit increase, fueled by ambitious economic diversification efforts. The latest report suggests that sukuk issuance worldwide will range between $160 billion and $170 billion in 2024, maintaining a steady upward trend from $168.4 billion in 2023 to $179.4 billion in 2022.
S&P Global, a renowned credit rating agency, revealed that the industry saw an 8% and 8.2% growth in 2023 and 2022, respectively. This growth was primarily driven by the expansion of banking assets and the sukuk market. Islamic banking assets witnessed a remarkable 56% growth in 2023, compared to 72% in 2022.
The Gulf Cooperation Council region played a significant role in this growth, accounting for 86% of the reserve increase in 2023. Saudi Arabia emerged as a key contributor, representing 56.7% of the maturation. The implementation of Vision 2030 and the rise in corporate and mortgage lending are expected to further bolster the Islamic finance industry in the next 12-24 months.
The UAE also made a substantial impact in 2023, attributed to the strong performance of the non-oil sector. Additionally, countries like Turkiye and Indonesia showed promising growth, although Malaysia and Turkiye faced challenges due to currency depreciation.
The issuance of Shariah-compliant debt products began on a strong note in 2024, with Saudi Arabia playing a pivotal role in driving performance. Despite a decline in issuance volumes in 2023, the market has rebounded with total issuance reaching $46.8 billion by March 31, 2024.
Looking ahead, the sukuk market is poised for continued growth, especially in core Islamic finance countries like Saudi Arabia. The industry is expected to address financing needs through innovative solutions, such as structured finance and mortgage refinancing.
While digitalization and sustainability initiatives have made progress in the Islamic finance sector, there is still room for improvement. Stakeholders are urged to collaborate and embrace emerging technologies to enhance efficiency and increase the value proposition for investors and issuers.
In conclusion, the future of Islamic finance is envisioned as sustainable, collaborative, and digital. By aligning with Shariah principles, sustainability goals, and leveraging technology, the industry is set to thrive and evolve in the years to come.