UNITED ARAB EMIRATES – Global Sukuk issuance reached $147 billion in the first nine months of 2021 and is projected to hit $180 billion by the end of this year according to Refinitiv’s 2021 Sukuk Perception and Forecast study.
Sukuk issuance is projected to grow at an estimated 10% CAGR over the next five years, reaching $290 billion in 2026. The leading five countries by Sukuk issuance are Malaysia, Saudi Arabia, Indonesia, Turkey and Kuwait, which together accounted for 90% of total issuance in the third quarter of 2021. According to the report, supported by Crescent Finance, sovereign issuance accounted for 58% of the total.
Sukuk issued in international, mostly Eurobond, markets rose sharply by Q3 2021, to $42 billion, compared with $45 billion for the whole of 2020. Issuers have been tapping demand from international investors seeking higher returns from emerging market debt, as low interest rates persist.
Mustafa Adil, Head of Islamic Finance, Refinitiv, a London Stock Exchange Group Business, said: “The global secondary Sukuk market reached $699 billion in value outstanding in Q3 2021, having grown strongly over the past five years, fuelled by the surge in Sukuk issuance during this period.”
“We have seen some new exciting trends especially in the retail and Environment, Social and Governance (ESG) areas. Developments in retail Sukuk have shown there is an increased tendency to offer Sukuk through online channels. This will make it easier to attract new investors, particularly a tech-savvy millennial generation. In addition, Covid-19 amplified the need for digital solutions for investments due to recurring lockdowns and social distancing restrictions,” he noted.
“ESG has become a major trend in the Sukuk market. Cumulative ESG Sukuk issuance amounted to $15 billion by Q3 2021. Total ESG issuance reached $5.0 billion in 2020 and is on track to set a new record in 2021,” Adil added.
Momentum in Sukuk issuance picked up significantly during the second and third quarters of 2020 as the economic repercussions of the pandemic led governments to take measures to alleviate the hit to their fiscal budgets. Collectively, GCC sovereigns issued $41.2 billion in Sukuk – 39% of the overall sovereign debt issued that year – marking a new record for GCC sovereign Sukuk.
Earlier this year, Refinitiv launched an enhanced Sukuk Now app which offers advanced analytical tools to better analyse the market and make better investment decisions including ESG and Green Sukuk screening.