The global Islamic finance industry saw substantial growth in 2024, reaching a milestone of more than $1 trillion in sukuk outstanding, according to a new report by S&P Global Ratings. The industry expanded by 10.6 per cent, fuelled by robust banking and sukuk performance.
The report titled ‘Islamic Finance 2025-2026: Resilient Growth Amid Upcoming Headwinds’, projects continued growth into 2025, though the sukuk market is navigating an evolving regulatory landscape, including the potential adoption of Sharia Standard 62.
The growth in 2024 was largely attributed to increased banking assets and a rise in sukuk issuance, particularly foreign currency-denominated issuances. S&P Global Ratings anticipates this growth will persist in 2025, barring any major economic or market shocks. The report also suggests that the recent revision of oil price assumptions will support growth in core Islamic economies.
“Financing needs driven by economic transformation programmes will remain high, and the inherent preference for Islamic finance will persist,” said S&P Global Ratings’ head of Islamic finance Mohamed Damak. “As a result, despite growing uncertainty, we expect the Islamic finance industry to grow in 2025.”
However, the sukuk market faces some uncertainty. The potential adoption of Sharia Standard 62 could disrupt the market from 2026. The extent of this disruption will depend on whether the standard is approved, its final content, and the timeline for implementation. The report suggests that if Standard 62 is adopted as proposed, it could fragment the market and make it less attractive to both investors and issuers.
The report also highlights the growth of sustainable sukuk, with issuance expected to reach $10 billion-$12bn in 2005. This segment is expected to continue driving growth in the sector, although short-term performance may fall short of initial expectations.
avinash@gdnmedia.bh
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