Governments across the core Islamic finance markets continue to adjust their funding mix, supporting long-term growth in Sukuk volumes.
Global Sukuk issuance is set to rise six per cent to around $130 billion this year, a fourth consecutive annual increase.
Moody’s stated that the change in global Sukuk issuance reflects sovereigns across core Islamic finance markets’ cultural attraction with Islamic finance and their governments’ desire to promote Shari’ah-compliant banking.
Nitish Bhojnagarwala, VP-Sr Credit Officer at Moody’s, said, “Increased activity in Saudi Arabia and Malaysia helped drive strong issuance of $87 billion in the first six months and this has reduced funding needs.”
The upward trend in Sukuk issuance across the globe is also supported by the rising demand for Islamic bonds from domestic Islamic banks and central bank issuance in the core Islamic finance markets.
In H1 2019, total Sukuk volumes grew to $87.4 billion, a 37 per cent increase from $64 billion the same period last year. Moody’s said that the increase was driven by the GCC region, where issuance rose nine per cent to $26.5 billion, Southeast Asia, where it grew 41 per cent to $53 billion and Turkey where it grew 300 per cent to $7.9 billion.
Saudi Arabia accounted for around half the wider GCC region's H1 2019 issuance, with volumes of $12.8 billion compared to $11 billion in the same period of 2018. While volumes in Malaysia increased by 23 per cent to $36 billion, making the country the world's leading issuer, with a 41 per cent share of the total.
The increase in Sukuk volumes in Malaysia reflects a surge in local currency issuance by financial institutions as well as a rise in the volume of short-term Islamic Treasury bills issued by Bank Negara Malaysia.