The global Sukuk issuance this year is seemingly struggling to match last year’s exceptional growth due to tougher market conditions. According to according to Standard& Poor’s (S&P) rating service, worldwide year-to-date issuance dipped 25% from last year to US$77.4 billion, as of 22 September 2013.
According to the report, the Gulf region witnessed a slowdown in issuance in the third quarter largely because of rising yields driven by the expectation that the US Fed would cut the bond buying programme.
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Despite the third quarter slowdown, S&P believes 2013 Sukuk issuance is on course to cross the US$100 billion mark.
Stuart Anderson, managing director and regional head, Middle East at S&P said: "The global Sukuk market remains limited in size and a handful of large issuances can transform what appears to be a slowdown story into an upbeat one.
"In the past two years, several ‘jumbo-sized’ issuances, in excess of US$3-4 billion, have significantly accelerated growth."
He added that good economic growth and faster recovery in GCC and Asia – which S&P notes are "the twin engines of the Sukuk market" – are expected to continue driving rapid growth in the sector.
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By GlobalDataThe rating agency also noted that the Islamic banking sector "continued to outstrip" conventional banking growth.
"Although profitability has shrunk from the pre-crisis period, owing to lower interest rates and lower non-core banking revenues, overall performance metrics have remained healthy."
S&P analysts expect Africa with significant Muslim population will be the next frontier of Sukuk expansion.
Sukuk is an Islamic bond structured in such a way as to generate returns to investors without infringing Islamic law.
