Data & Analytics Insights

Islamic finance: global industry on track towards projected growth

Shereen Mohamed

Senior Research Analyst, LSEG

Our curated newsletters and monitors delve into the dynamics of the Islamic finance industry. They also provide exclusive statistics on different components of the industry such as Sukuk, Islamic funds and Shariah compliant equities. 

  • Notable trends in Islamic banking and Sukuk space as tracked in our newsletters
  • Our Workspace database saw sustainable Sukuk growing by 17% in issuance in Q1 2024 from Q1 2023
  • Further exclusive statistics and insights on Sukuk and sustainable Islamic finance for Workspace users

The Islamic finance industry is projected to grow to US$6.67 trillion by 2027 according to our Islamic Finance Development Report 2023. A few developments for the industry during the first quarter of this year contribute towards this projection. Below is a wrap-up on the most important events on Islamic finance during the first quarter of 2024.

Islamic banking sector shaped by entrance of new digital players and consolidation

This quarter saw the introduction of new Islamic banks globally. For instance, a modern digital Islamic community bank in the UAE is launched, Ruya Bank. The bank aims towards financial inclusion and innovation. This adds to the array of Islamic banks operating in the country that are licensed by the Central Bank of the UAE. 

UAE is not the only country seeing this development. By the end of this year, Saudi Arabia is expected to see the public launch of STC Bank, a Shariah compliant bank that is being transformed from a licensed FinTech company, stc pay. The launch of this bank also contributes towards the ambitious goal of the Kingdom towards becoming a cashless society in its Vision 2030.

A country which started tapping the Islamic banking sector is Uganda, which saw the entry of Salaam Bank, a subsidiary of Salaam’s Djibouti-based lender. It follows the pass of legislation that allows Islamic banking in the country due to growing demand for Shariah-compliant services.

The Islamic banking sector is not only being reshaped by entrance of new players, but also with consolation activities. In Bahrain, Al Salam Bank signed a final deal with Kuwait Finance House to acquire the latter’s stake in its Bahrain subsidiary. In Indonesia, PT Bank Tabungan Negara aims to have its Shariah business unit merged with another Islamic bank in the country, Bank Muamalat.

More on the latest Islamic banking developments and other sectors on the industry can be received directly on your inbox. The Islamic Finance Gateway Newsletters provide snapshot of key market trends to an exclusive Islamic finance community. The newsletters are published on a regular basis, covering the latest Islamic finance industry updates in a digestible format. 

Thriving sukuk market driven by diversification and funding needs

Sukuk, which saw issuance totalling US$ 65.4 billion in Q1 2024 according to the Sukuk Now app on Workspace, had a few notable developments during the quarter as well.

sukuk historical issuance (2020 - Q1 2024)

The USD Sukuk market saw strong demand with many established issuers capitalised on the bid from Islamic investors to reprice their curves tighter. Other factors contributing to its growth is the growing funding needs in regions such as the Middle East as well as the ability to diversify funding sources for issuers in the GCC. With this, new and rare names started raising cash through Sukuk such as Oman’s Nama Electricity Distribution Company.

In Saudi Arabia, the Ministry of Finance and the National Debt Management Centre launched government savings Sukuk in February. It aims to elevate the individual savings rate in the country while contributing towards enhancing financial literacy in the country. This adds Saudi Arabia among the few countries that offer retail Sukuk such as Indonesia and Oman.

The country is known to be active in Sukuk markets, with its sovereign wealth fund, Public Investment Fund, issuing its second Sukuk this quarter, thus joining a wave of emerging market issuers that aim to meet the rising demand for debt before interest rates are lowered by central banks later this year. A second sovereign wealth fund joined this wave with Abu Dhabi’s Mubadala issuing its debut Sukuk in March.

A flourishing segment of Sukuk is sustainable and green Sukuk, which saw total issuance of nearly US$ 4.0 billion in in Q1 2024, a 17% increase from Q1 2023. The issuance was mostly driven by sustainability Sukuk from GCC banks. A country with a promising outlook on Islamic sustainable finance is Oman, where its Ministry of Finance unveiled its Sustainable Finance Framework which outlines its intention to use Green, Social and Sustainability Sukuk for relevant projects.

green and sustainability sukuk issuance (2017 - Q 2024)

LSEG Islamic finance monitors cover the latest market trends on a semi-annual basis, covering Sukuk and Sustainable Islamic Finance. The latter monitor covers Sukuk, Islamic funds and Shariah compliant equities. Each monitor is prepared in a way to give a holistic perspective on industry’s status quo. The monitors provide a snapshot of latest market movements based on LSEG Workspace database.

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