The total volume of outstanding sukuk has crossed $800 billion for the first time in Q2 2023, according to global ratings agency Fitch.
Although the sukuk issuance is expected to slow down in Q3 2023 due to summer vacations in many countries, it is set to gain pace in the final quarter of the current year.
Sukuk issuance in core markets reached $49.1 billion in Q2 2023, up 10% quarter-on-quarter (QoQ). However, bond issuance fell by 4.8% QoQ.
“As expected, H1 2023 was a busy period for sukuk issuance on the back of issuers’ funding needs and diversification attempts, as well as initiatives to develop the local debt capital markets,” said Bashar Al-Natoor, Global Head of Islamic Finance, Fitch Ratings.
Most Fitch-rated outstanding sukuk were investment grade at 79%, with 12.6% of issuers having a “positive” outlook and 77.5% having a “stable” outlook.
Outstanding ESG-sukuk reached $30.5 billion, up 22.5% QoQ.
The UAE issued the first Emirati dirham-denominated treasury sukuk, which supports funding diversification initiatives and the local Islamic finance ecosystem.
According to Fitch, favourable regulations were witnessed in the GCC. Saudi Arabia’s Capital Market Authority announced the cancellation of its share in the sukuk and bonds trading commission starting May 2023.
In the UAE, the Securities and Commodities Authority issued regulations exempting companies planning to list their green or sustainability-linked sukuk or bonds in a local market from registration fees for 2023.
The report said that only 0.21% of all issued sukuk have defaulted, adding that sukuk recovery is still untested in most Islamic finance markets.