Sukuk issuance to remain broadly stable in 2018

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Global sukuk issuance is expected to reach $90-$100 billion in 2018, in line with 2017 levels, says Moody’s Investors Service.

“Over the long term, we expect sukuk issuance volumes to continue to grow as governments across the core Islamic finance markets shift their financing mix towards a combination of conventional and Islamic instruments,” says Nitish Bhojnagarwala, a Vice President and Senior Credit Officer at Moody’s.

However, sukuk issuance has gone beyond Islamic finance markets. When the National Treasury of South Africa released its debut Sukuk in the international capital markets in 2014, it became the third Sukuk to be issued by a non-Islamic country.¬†The $500m 5.75-year Sukuk was at the time the largest Sukuk issuance from Sub-Saharan Africa, after Hong Kong and the U.K. Other African countries such as Togo, Sudan, Gambia, Senegal and Ivory Coast have also issued Sukuk. A South western state in Nigeria had also in 2013 issued an N11.4 billion Sukuk. Africa’s infrastructural challenges are numerous and with the Sukuk’s proven viability and dynamism as a global product for fund-raising and investment activities in the international financial markets, the interest-free financing has become an alternative source of funding big projects.

With acceptability continuing to grow,¬†Moody’s expect a broadly stable issuance for the year – despite a 12 percent decrease to $55 billion in the first half of 2018. The decrease in sukuk issuances during the first half of 2018 was driven by lower volumes from the Gulf Co-operation Council (GCC) region.

Moody’s notes that the launch in July 2018 of a primary dealers programme for government sukuk in Saudi Arabia and the start of sukuk trading on the Turkish stock exchange in August 2018, are supportive for the market. Green sukuk issuance is set to accelerate in Malaysia and Indonesia as governments in both countries seek to promote sustainable policy agendas by attracting private capital into low-carbon and climate-resilient infrastructure projects. The world’s first green sukuk was issued in 2017 in Malaysia, and the government of Indonesia unveiled the first sovereign green sukuk in February 2018, raising $1.25 billion.

According to Moody’s, the Malaysian and Indonesian precedents could encourage other issuers to enter the green sukuk market, especially governments that aim to diversify their economies away from natural resources such as oil.



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