Islamic Finance Sector Driving Saudi Economic Growth: Report
Riyadh, Saudi Arabia – According to new research, the Islamic finance industry is projected to grow in 2023-2024 thanks to Saudi Arabia’s strong banking system.
S&P Global Ratings – The US-based agency, S&P Global Ratings, is expected to grow around 10% across the industry from 2023 to 2024, after seeing a similar expansion in 2022. The Kingdom and Kuwait contributed significantly to the increase in
The report further shows that new supply of the product will exceed what was set for maturity despite the expected economic slowdown and reduced sukuk issuance this year.
The report reflects US-based Fitch Ratings findings released in April, which found that global sukuk issuance in the second quarter of 2023 is likely to remain short-term amid continued macro volatility. It claims to be on the rise despite facing significant uncertainties.
S&P Global Ratings said in its report:
“However, we believe the performance of the Saudi banking system will continue to support much of the expanding Islamic financial industry.
“In the rest of the GCC, growth of around 5% would be reasonable in the absence of another major government investment cycle.”
The report argued that rather than a truly globalized sector, Islamic finance remains a collection of local industries and is looking at ways to “increase its competitiveness” to ensure broader appeal. There is
However, among the countries considering using the sukuk market, Egypt and Turkiye were identified as most likely to seek funds through this financial instrument.
The report states:
“We understand that this has generated significant investor interest, with a demand of over $6 billion, with 59% allocated to investors in the Middle East and North Africa.
“The return on the 3-year sukuk was set at 10.875%, which at the time was roughly in line with the yield on Egyptian traditional bonds with a similar maturity date in 2026.”
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