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Tribune News Network
Doha
The global Islamic finance industry will grow by 10-12 percent in 2021-2022 after slowing to 10.6 percent in 2020 excluding Iran, S&P Global Ratings has said in its latest report.
According to the report, growth of Islamic banking assets in some Gulf Cooperation Council (GCC) countries, Malaysia, and Turkey and sukuk issuances exceeding maturities explain this performance.
The industry continued to grow last year despite the COVID-19 pandemic, although at a lower pace than in 2019, with global Islamic assets expanding by 10.6 percent in 2020 against growth of 17.3 percent the previous year.
Islamic finance, which bans interest payments and pure monetary speculation, has been on the rise for many years across markets in Africa, the Middle East and Southeast Asia, but it remains a fragmented industry with uneven implementation of its rules.
“Over the next 12 months, we could see progress on a unified global legal and regulatory framework for Islamic finance. We believe that such a framework could help resolve the lack of standardisation and harmonisation that the Islamic finance industry has faced for decades,” S&P said on Monday.
The industry is expected to receive some support in the coming two years in Saudi Arabia, where mortgages and corporate lending are expected to rise as the country pushes ahead with plans to diversify the economy. Investments in Qatar for the 2022 soccer World Cup and the Expo event in Dubai later this year are also expected to support growth.
On the sukuk front, S&P Global Ratings forecasts total sukuk issuance of about $140 billion–$155 billion this year. This compares with a drop in issuance to $139.8 billion in 2020 from $167.3 billion in 2019.
“We expect an increase in the volume of issuances this year as liquidity remains abundant, corporates and sovereigns come back to the market, and new issuances exceed maturing sukuk. In the first quarter of 2021, issuance volumes were up by 1.4 percent in total and 22 percent if Sukuk re-openings are excluded,” the report said.
“Although their contribution to the industry remains small, we also expect the takaful and the fund sector to grow this year. We continue to see the takaful sector expanding at 5-10 percent, while the funds industry might see some growth as investors chase yields,” it said.
S&P also highlighted that the full impact of the coronavirus crisis has yet to materialise and more requests for sukuk restructurings and maturity extensions, as well as higher default rates, are expected this year.
“We see pressure on real estate developers, given the drop in real estate prices in the Gulf Cooperation Council and building risks in the commercial real estate sector,” S&P said.
“Similarly, companies related to aviation, tourism, travel, and hospitality sectors that have been severely hit by COVID-19 will take several quarters to recover to pre-pandemic levels,” it said.
Doha
The global Islamic finance industry will grow by 10-12 percent in 2021-2022 after slowing to 10.6 percent in 2020 excluding Iran, S&P Global Ratings has said in its latest report.
According to the report, growth of Islamic banking assets in some Gulf Cooperation Council (GCC) countries, Malaysia, and Turkey and sukuk issuances exceeding maturities explain this performance.
The industry continued to grow last year despite the COVID-19 pandemic, although at a lower pace than in 2019, with global Islamic assets expanding by 10.6 percent in 2020 against growth of 17.3 percent the previous year.
Islamic finance, which bans interest payments and pure monetary speculation, has been on the rise for many years across markets in Africa, the Middle East and Southeast Asia, but it remains a fragmented industry with uneven implementation of its rules.
“Over the next 12 months, we could see progress on a unified global legal and regulatory framework for Islamic finance. We believe that such a framework could help resolve the lack of standardisation and harmonisation that the Islamic finance industry has faced for decades,” S&P said on Monday.
The industry is expected to receive some support in the coming two years in Saudi Arabia, where mortgages and corporate lending are expected to rise as the country pushes ahead with plans to diversify the economy. Investments in Qatar for the 2022 soccer World Cup and the Expo event in Dubai later this year are also expected to support growth.
On the sukuk front, S&P Global Ratings forecasts total sukuk issuance of about $140 billion–$155 billion this year. This compares with a drop in issuance to $139.8 billion in 2020 from $167.3 billion in 2019.
“We expect an increase in the volume of issuances this year as liquidity remains abundant, corporates and sovereigns come back to the market, and new issuances exceed maturing sukuk. In the first quarter of 2021, issuance volumes were up by 1.4 percent in total and 22 percent if Sukuk re-openings are excluded,” the report said.
“Although their contribution to the industry remains small, we also expect the takaful and the fund sector to grow this year. We continue to see the takaful sector expanding at 5-10 percent, while the funds industry might see some growth as investors chase yields,” it said.
S&P also highlighted that the full impact of the coronavirus crisis has yet to materialise and more requests for sukuk restructurings and maturity extensions, as well as higher default rates, are expected this year.
“We see pressure on real estate developers, given the drop in real estate prices in the Gulf Cooperation Council and building risks in the commercial real estate sector,” S&P said.
“Similarly, companies related to aviation, tourism, travel, and hospitality sectors that have been severely hit by COVID-19 will take several quarters to recover to pre-pandemic levels,” it said.
