Global Sukuk Issuance Expected to Hit $200 Billion in 2025

Standard & Poor’s Ratings expects global sukuk issuance to reach $190-200 billion in 2025, following a strong performance in 2024. Total issuances last year reached $193.4 billion, compared to $197.8 billion in 2023.

Overall, total foreign currency issuances rose to $72.7 billion in 2024 from $56.5 billion in 2023, driven mainly by the GCC, Malaysia and Indonesia. Among the GCC countries, Saudi Arabia and Kuwait led the way, with banks, corporates and the Saudi government ramping up their foreign currency issuances, while banks and corporates in Qatar and Oman were also more active in this area. The UAE ended the year with slightly lower foreign currency sukuk issuances compared to last year. In Malaysia, performance was mainly supported by increased issuances by the International Islamic Liquidity Management Corporation (IILM) and a number of issuances by the central bank and sovereign wealth fund. The global agency noted that many issuers took advantage of the improvement in global liquidity during 2024, supported by the steps of major central banks towards easing monetary policy, and it expects this monetary easing to continue during 2025, albeit at a slower pace, which will provide issuers with greater opportunity to benefit from the market.

In addition, S&P sees high funding needs in major Islamic countries, as a result of economic diversification programs, as a driver of further issuance. The agency also expected that the adoption of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Index 62 will be postponed until at least 2026, as the organization continues to receive feedback from the market.

Despite the strong market performance, the sukuk industry faces challenges related to evolving Shariah requirements. The agency noted weaknesses in the legal documentation of some structures, especially those using equity holdings as the underlying asset. It believes that these structures may carry additional risks compared to conventional sukuk, which raises questions about the mechanism for resolving them. The agency stressed the importance of industry stakeholders cooperating to find a balance between Sharia requirements and market needs, with the aim of enhancing the sustainability of the sukuk market and achieving investors’ aspirations. The global institution’s report indicated the stability of global sukuk issuances in 2024, reaching $193.4 billion at the end of the year compared to $197.8 billion in the previous year, noting that this performance was supported by a significant increase in foreign currency-denominated issuances and a decrease in local currency issuances. This was also aided by strong financing needs in core Islamic finance countries, the need to attract foreign capital, and improved global liquidity conditions, as major central banks began to ease their monetary policy. In 2025, S&P expects total issuance to approach 2023 levels of $190 billion to $200 billion, with foreign currency issuance contributing $70 billion to $80 billion as monetary easing continues and economic conditions in core Islamic finance countries remain supportive. Geopolitical risks have not yet impacted issuance, but could pose some downside risks, although our base case does not anticipate major disruptions.

The report also showed that local currency sukuk issuance declined by 14.6% year-on-year, primarily due to lower issuance in Malaysia, Pakistan, Turkey and Indonesia.

The largest decline in local currency issuance was in Malaysia, where government issuance declined due to a smaller fiscal deficit due to subsidy cuts. Similarly, issuance by the Central Bank of Malaysia declined as liquidity conditions tightened for Islamic banks as their funding growth continued to outpace deposit growth.