US$202.1 billion of Sukuk were issued in 2021 representing a 9% growth. US$713 billion of Sukuk were outstanding as of 2021.
Sukuk issuances are expected to decline due in part to higher energy prices resulting in lower financing needs of issuers according to an S&P Global Ratings report which stated “Total Sukuk issuance dropped to $74.5bn in first-half 2022 compared with $93.3bn during the same period in 2021, both in local and foreign currency”.
Fragmented Sukuk Industry
S&P added, “More broadly, we note that Islamic finance remains a collection of local industries rather than a truly globalized one. Even after 50 years, the industry is still concentrated in oil-exporting countries and seems unable to attract interest beyond its original territory”.
The complexity of structuring Sukuk was highlighted as a reason for the continued failure of Sukuk to enter into a globalized cross-border market. Legal challenges based on the preferences of some Sharia scholars were also highlighted as a potential blocker to increased issuance.
“In our view, the lack of competitiveness for some Islamic finance products and complexity related to structuring Sukuk are the main factors deterring noncore players and particularly non-Muslim jurisdictions. In the UK for example, Islamic finance is still a nascent segment. This is despite the government having issued two sovereign sukuks and the listing of several sukuks on the London Stock Exchange (LSE).”
Domestic Markets Growth in Saudi Arabia and Malaysia
The Islamic Corporation for the Development (ICD) of the Private Sector in its Islamic Finance Development Report 2022, highlighted Saudi Arabia narrowing the corporate Sukuk issuance gap with Malaysia with Sukuk issuance in Saudi Arabia growing by 31%, from US$38 billion in 2020 to US$49.9 billion in 2021. Saudi Arabia’s issuance was boosted by Aramco Sukuk, the largest corporate Sukuk issuance in 2021.
Originally published on www.sukuk.com