Saudi Arabia to drive global sukuk issuance in 2019: Moody’s

Global sukuk issuance is expected to increase by 6 percent to reach $130 billion in 2019, followed by a strong first half driven by increased activity in Saudi Arabia and Malaysia, Moody's Investors Service said in a recent report.

“Increased activity in Saudi Arabia and Malaysia helped drive strong issuance of $87 billion in the first six months and this has reduced funding needs," said Nitish Bhojnagarwala, senior vice president at Moody’s.

"We therefore expect second-half volumes to moderate to around $43 billion, though Malaysia and Gulf Cooperation Council countries, particularly Saudi Arabia, will continue issuing regularly," he added.

Governments across the core Islamic finance markets (Malaysia, Indonesia and GCC countries) continue to adjust their funding mix, supporting long-term growth in sukuk volumes.

The change reflects these countries' cultural affinity with Islamic finance, and their governments' desire to promote Shariah-compliant banking. Rising demand for sukuk from domestic Islamic banks, and central bank issuance in the core Islamic finance markets, are also supportive.

New entrants and green sukuk could also stimulate issuance. Moody's expects some African sovereigns to enter the market, and Egypt set up a Shariah supervisory committee in April to oversee sukuk issuance.

While the green sukuk market is in its infancy, issuance is likely to accelerate as efforts to combat climate change gain traction, building on initial green sukuk transactions in Malaysia and Indonesia.