Global sukuk issuance will reach between $190 billion and $200 billion in 2025, driven by the anticipated growth in the GCC region, a senior S&P Global Ratings analyst has said.
Total issuance reached $193.4 billion in 2024, down slightly from the previous year’s $197.8 billion.
Foreign currency-denominated issuance will contribute $70 to $80 billion to this year’s sukuk issuance. The segment saw a 29% rise to $72.7 billion in 2024.
Saudi Arabia and Kuwait led the way, with banks, corporations and the Saudi government stepping up their foreign-currency issuance, said S&P Global Ratings Islamic Finance Head Mohamed Damak.
In addition, banks and corporations in Qatar and Oman were more active. However, the UAE ended 2024 with marginally lower foreign currency sukuk issuance than last year.
“We expect foreign currency-denominated issuance to remain elevated in 2025,” said Damak.
The total volume of sustainable sukuk issuance hit $11.9 billion in 2024, compared to $11.4 billion in 2023. The Middle East accounted for about 25-30% of total sustainable issuance.
“We expect the issuance volume of sustainable sukuk to hover at approximately $10 to $12 billion in 2025, in the absence of any major acceleration in implementing net zero policies by core Islamic finance countries or regulatory action,” Damak said.
Saudi Arabian issuers contributed the highest share of total sustainable sukuk issuance at 38% last year, underpinned primarily by local bank issuance.
Although the UAE’s sustainable sukuk issuance volume fell by 60% compared to 2023, the country still contributed 15% of the overall issuance volume.
“We expect to see an acceleration of issuance if and when there is an acceleration in the climate transition of GCC issuers and renewable energy targets, as well as regulators offering incentives to take the sustainable issuance route.”
Damak said monetary easing will continue in 2025, albeit at a slower pace than previously expected.
“This, combined with high financing needs in core Islamic finance countries due to ongoing economic diversification programs, will lead issuers to take any windows of opportunity to issue in the market,” he said.
While geopolitical risk has not yet dragged on issuance but could pose some downside risk, Damak added.
S&P believes that the potential impact of adopting Standard 62 of the Accounting and Auditing Organization for the Islamic Financial Institutions will come in 2026 as the organisation continues receiving market feedback.
(Editing by Seban Scaria seban.scaria@lseg.com)
