Global sukuk issuance to hit $185bn in 2022, projected to reach $257bn by 2027, reveals study

Refinitiv, a London Stock Exchange Group (LSEG) business, has released findings of its Sukuk Perceptions and Forecast Study 2022, which reveals that global sukuk issuance is projected to moderate, settling at $185bn in 2022. According to the study, around 41 per cent of respondents indicated they were still bullish about growth in global sukuk supply.

The findings were published in a report, titled Navigating a new Environment, which projected global sukuk issuance would grow at an estimated compound annual growth rate of 6.8 per cent over the next five years, reaching $257bn in 2027.

The report indicated that the momentum of international sukuk issuance began to slow in the first half of 2022, despite strong activity from issuers capitalising on high demand from international investors early in the year.

Highlights of H1 2022

Mustafa Adil, head of Islamic Finance, Refinitiv,  said: “A new sukuk issuance record had been set in 2021 for the fifth consecutive year, reaching a total of $196.5bn. Although this was up by 8.2 per cent from $181.6bn in 2020, that compares with much greater average annual growth of 21 per cent in the previous five years.”

“Global sukuk issuance in the first half of 2022 raised $100.9bn, marginally lower than $104.2bn in H1 2021. Despite a strong start to the year, issuance momentum slowed as the Federal Reserve and other central banks kicked off a global monetary tightening cycle. The surge in oil prices also contributed to the slowdown in issuance, as it reduced government borrowing needs in core sukuk markets. Dollar sukuk issuance amounted to $22bn in H1 2022, down 10 per cent from $33.2bn H1 2021, as issuers concentrated their borrowing in domestic markets and the Fed’s tightening policy strengthened the dollar,” he added.

Malaysia, Saudi Arabia and Indonesia remained the largest issuance bases for sukuk, and together made up 75 per cent of sukuk issued in 2021 and the first half of 2022.

In Saudi Arabia, sukuk raised $28.1bn during H1 2022, compared with $24.2bn during the same period of 2021, despite the surge in oil prices. Still, issuance slowed during the second quarter as the kingdom registered a surplus from higher oil revenues.

As with most GCC governments, issuances supporting new and continuing infrastructure projects will likely be offered once volatility in global financial markets calms. This is also the case with the region’s ESG sukuk issuances that are in the pipeline awaiting more conducive conditions.

Sovereigns continue to drive sukuk issuance, maintaining around a 60 per cent share of global issuance since 2017. Sovereign sukuk issued in H1 2022 totalled $68.8bn, of which 83 per cent were issued by GCC, Malaysian and Indonesian governments.

The Saudi government was the largest sovereign issuer in H1 2022, with $22.1bn, despite soaring oil prices having reduced government funding requirements.