Sukuk issuance in the first nine months of 2021 stood at $147 billion, up from $137 billion for the same period last year, according to the “2021 Sukuk Perceptions and Forecast Study” by Refinitiv. Sukuk issuance waned during Q3 after record quarterly issuance in the previous quarter, yet the momentum remains strong.

Mustafa Adil, Head of Islamic Finance at Refinitiv, 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.”’

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Total global sukuk issuance for 2021 is still expected to hit a new record of around $180 billion. Looking ahead, the report projects that sukuk issuance will grow by 10 percent annually over the next five years, reaching $290 billion in 2026.

This continued growth in issuance is expected to catch up with the demand for sukuk investment from institutional investors, gradually narrowing the supply-demand gap in the sukuk market from $178 billion in 2021 to $120 billion by 2026.

Read the report: “Sukuk Perceptions and Forecast Study 2021: Thriving amidst Uncertainty”

The report also revealed trends that have gained traction in the sukuk market since 2020, mainly in retail and in environment, social and governance (ESG). In its survey findings, the report revealed that 73.5 percent of respondents said ESG-related sukuk, including green, sustainability and waqf sukuk, were gaining the most traction compared to other emerging trends.

“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 billion in 2020 and is on track to set a new record in 2021,” Adil added.

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A second wave of ESG sukuk activity is building up within the GCC as some governments revise their public debt frameworks to incorporate ESG-compliant debt instruments, preparatory to opening their markets to potentially billions of dollars in investments in ESG-related projects such as renewable energy. This is expected to propel the growth of the ESG sukuk market.

The Saudi government recently announced it was considering issuing ESG bonds and sukuk as part of its public debt strategy. Meanwhile, the kingdom’s sovereign wealth fund, the Public Investment Fund (PIF), is also developing a framework for ESG debt issuances, eyeing a substantial debut international issuance by the end of 2021.

Elsewhere, the Omani government is working with the IMF on developing its post-pandemic public debt strategy, and it has already issued draft regulations that will allow the introduction of waqf, green and blue sukuk. Moreover, statements from the Qatar Financial Centre (QFC) suggest that sovereign green bond and sukuk issuances can be expected “soon”.

(Reporting by Jinan AlTaitoon; editing by Seban Scaria)
Jinan.AlTaitoon@refinitiv.com 

For more insights and analysis on sukuk market size and trends, visit the Refinitiv Workspace/Eikon app, Sukuk Now. 

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© ZAWYA 2021