KUALA LUMPUR, Malaysia (July 1): According to S&P Global Ratings, the Islamic finance industry would increase by 10 to 12 percent in 2021 and 2022, despite the fact that GDP growth in some countries is expected to be lower than in previous years. Mohamed Damak, Global Head of Islamic Finance and Sector Lead, Financial Institutions, Middle East and Africa, said the industry would benefit from strong financing growth in Saudi Arabia in mortgages and corporate lending, Qatar (investments related to the upcoming football World Cup), and the United Arab Emirates (due to the Dubai Expo) to a lesser extent.
“We believe that the Dubai Expo will likely create some dynamics and lead to more financing.”
“Other nations, such as Malaysia and Turkey, will continue to grow,” he said today at S&P Global Ratings’ inaugural Global Emerging Markets Virtual Conference. “However, Turkey’s growth will be slower, driven mostly by public sector participation banks.”
The discussion focused on the growth of the Islamic financial business in 2021 and 2022.
According to Mohamed, total issuance in the sukuk market is likely to expand between US$140 billion to US$155 billion (US$1=RM4.14) this year, up from almost US$140 billion in 2020.
“I believe that several sovereigns in the core Islamic finance countries will be more actively tapping into the sukuk market this year after doing so in conventional markets in 2020.”
“Corporate issuance will undoubtedly come back as well, albeit slowly,” he said, adding that “the core Islamic finance countries were expected to execute some of the capital expenditure that they had deferred in 2020 due to the crisis in access to capital markets this year.”
According to Mohamed, there are US$65 billion worth of sukuk due to mature in 2021, with a portion of this amount expected to be refinanced on the sukuk market.
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The industry’s other two major components are money and takaful.
“We expect the takaful sector to increase by roughly five to ten percent,” he said, “while the fund business may see some growth as investors aggressively hunt rates.”
Mohamed believes that egalitarian Islamic finance principles can contribute to shared prosperity, given that the business, which began 50 years ago and is now worth $2.2 trillion, was built from the ground up./n
