Saudi Arabia: Global sukuk issuance is expected to continue growing in the remaining months of this year, driven by funding and refinancing demands, Fitch Ratings said. 

According to the credit rating agency, additional factors that will propel the market’s steady development are economic diversification efforts by countries in the Gulf Cooperation Council region and the maturation of the debt capital market. 

However, some possible risks that could affect the issuance include new Shariah requirements that could alter credit risk, geopolitical uncertainties and high oil prices. 

“Corporates and projects will likely stay reliant on bank funding, but the government push to develop the DCM and reduce bank reliance could drive sukuk issuance,” said Fitch in the report. 

Moreover, the GCC DCM reached $940 billion in outstanding sukuk and is well on its way to surpass the $1 trillion mark. 

“Around 80 percent of GCC sukuk is now investment-grade, and the GCC DCM is well on its way to crossing $1 trillion outstanding. Saudi Arabia, UAE and Malaysia will likely stay among the most active sukuk issuers,” said Bashar Al-Natoor, global head of Islamic Finance at Fitch Ratings. 

Fitch revealed that global outstanding sukuk expanded 10 percent year-on-year to $867 million at the end of the first quarter, with GCC countries accounting for 35 percent of this amount. 

The report pointed out that Malaysia is still the largest market globally for these Islamic bonds, with around 60 percent of its ringgit DCM in sukuk.

In January, a report released by S&P Global also echoed similar views and noted that sukuk issuance globally would remain steady in 2024. 

According to the agency, higher financing needs in some core Islamic finance countries and easing liquidity conditions worldwide are two crucial factors driving the market’s growth this year. 

S&P Global projected that digitalization could unlock some opportunities by streamlining sukuk issuance, even though it demands the harmonization of legal documents and a standardized interpretation of the Shariah.

The report also predicted that sustainable Shariah-compliant bond volumes are also expected to rise in 2024, on the back of the successful UN Climate Change Conference held in Dubai last year.