Global Islamic finance set to grow as major markets recover – S&P

DUBAI (Reuters) – Global $ 2.2 trillion Islamic finance industry set to grow 10-12% between 2021 and 2022 amid rising Islamic bond issuance and modest economic recovery in major Islamic financial markets, said S&P Global Ratings.

FILE PHOTO: The Levent business and financial district, made up of the headquarters of major Turkish companies and popular shopping malls, is seen from the Sapphire Tower in Istanbul, Turkey August 16, 2016. Photo taken through a window. REUTERS / Osman Orsal / File Photo

The industry continued to grow last year despite the COVID-19 pandemic, albeit at a slower pace than in 2019, with global Islamic assets increasing 10.6% in 2020 against growth of 17.3% the previous year.

Islamic finance, which prohibits interest payments and pure currency speculation, has been on the rise for many years in African, Middle Eastern and Southeast Asian markets, 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 address the lack of standardization and harmonization to which the Islamic finance industry has been facing it for decades, ”S&P said Monday.

The sector is expected to receive some support over the next two years in Saudi Arabia, where mortgages and business loans are expected to increase as the country continues its plans to diversify the economy.

Investments in Qatar for the 2022 FIFA World Cup and Expo event in Dubai later this year are also expected to support growth.

The rating agency predicts that global issuance of Islamic bonds, or sukuk, will reach $ 140 billion to $ 155 billion this year, from around $ 140 billion in 2020, thanks to the abundance of liquidity and sustained financing needs. businesses and governments.

S&P also pointed out that the full impact of the coronavirus crisis has yet to materialize and that more requests for sukuk restructurings and maturity extensions, as well as higher default rates, are expected this year.

“We are seeing pressure on real estate developers, given declining property prices in the GCC (Gulf Cooperation Council) and construction risks in the commercial real estate sector,” S&P said.

Likewise, businesses related to aviation, tourism, travel and hospitality – sectors that have been hit hard by COVID-19 – will take several quarters to recover to pre-pandemic levels.

Report by Davide Barbuscia. Edited by Jane Merriman


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