Global sukuk issuances surge 36% in 2021 to $252.3bn

Global sukuk issuances surged by 36.1 per cent in 2021 to $252.3 billion and are expected to continue to grow this year, according to a new report from Fitch Ratings.

Robust Islamic investor appetite, a diversification in funding goals and Islamic-finance development agendas are expected to drive the growth of sukuk issuance in the region.

“Downside risk stems from higher oil prices reducing a number of sovereigns’ funding needs, AAOIFI [Accounting and Auditing Organisation for Islamic Financial Institutions] compliance complexities, traditional risks such as interest-rate rise, lower global investor appetite for emerging-market debt and political risk,” said Bashar Al Natoor, global head of Islamic finance at Fitch.

Central banks, governments and multilateral institutions dominated sukuk issuances in 2021. GCC countries, Malaysia, Indonesia, Turkey and Pakistan accounted for $230.2bn of total deals. The UK, Maldives, and Nigeria, also issued sukuk or Islamic bonds during the period to help to meet their funding needs.

Fitch report also said green and sustainable sukuk volumes rose 17.2 per cent annually in 2021 to $15bn and the theme is likely to remain “prominent in 2022” as countries focus on cutting gas emissions to protect the environment.

A number of companies from the GCC issued sukuk last year to secure funding while interest rates were low globally. Saudi Aramco, the world’s largest oil exporting company, raised $6bn with a debut sukuk in June, while Acwa Power raised $746m.

First Abu Dhabi Bank, the UAE's biggest bank by assets, as well as Kuwait’s Warba Bank secured funding through Islamic bonds. They raised $500m and $250m respectively.

A separate report by Moody's in September forecast that gross short and long-term sukuk issuances in 2021 are expected to reach between $190bn and $200bn as improving economic conditions reduce funding needs. Volumes, however, were to be below the $205bn recorded in 2020.

Sukuk issuance in the GCC fell 19 per cent in the first half to $35.3bn, owing to a “significant drop in sovereign issuance”, Moody's said.