S&P Global: Islamic Finance Industry to Grow by 10-12pc in 2021-2022

The Islamic finance industry will continue to grow by 10 to 12 per cent over 2021 and 2022 despite some countries’ gross domestic product growth is anticipated to be lower than what had been observed historically, according to S&P Global Ratings.

Global Head of Islamic Finance and Sector Lead, Financial Institutions, Middle East and Africa, Mohamed Damak said the industry would be supported by strong financing growth in Saudi Arabia in mortgages and corporate lending, Qatar (investments related to the upcoming football World Cup), and to a lesser extent, the United Arab Emirates due to the Dubai Expo.

“We think that the Dubai Expo will probably create some dynamics and trigger some lending growth.

“Other countries, like Malaysia and Turkey, will also continue to grow, although Turkey’s growth will be at a slower pace, driven primarily by public sector participation banks,” he said today during S&P Global Ratings inaugural Global Emerging Markets Virtual Conference.

The session zeroed in on the Islamic finance industry’s growth over 2021 and 2022.

Mohamed said for the sukuk market, the total issuance is expected to grow between US$140 billion and US$155 billion (RM643 billion) this year against almost US$140 billion in 2020.

“I think some sovereigns in the core Islamic finance countries will probably be tapping into the sukuk market more aggressively this year after tapping into conventional markets in 2020.

“Corporate issuance will probably come back too, although moderately, and the core Islamic finance countries were likely (this year) to execute some of the capital expenditure that they have deferred in 2020 because of the pandemic to access to capital markets,” he added.

According to Mohamed, there is US$65 billion worth of sukuk that is expected to mature in 2021 and it is believed that part of this amount is likely to be refinanced on the sukuk market.

“The other two important components of the industry are funds and takaful.

“We expect to see the growth of the takaful sector by around five to 10 per cent, while the fund industry might see some growth as investors actively chase after yields,” he said.

Mohamed believes that equitable Islamic finance principles could contribute to shared prosperity as the industry, which was created from scratch 50 years ago, is now worth US$US$2.2 trillion.