The latest report by IMARC Group, titled “Sukuk Market Report by Sukuk Type (Murabahah Sukuk, Salam Sukuk, Istisna Sukuk, Ijarah Sukuk, Musharakah Sukuk, Mudarabah Sukuk, Hybrid Sukuk, and Others), Currency (Turkish Lira, Indonesian Rupiah, Saudi Riyal, Kuwaiti Dinar, Malaysian Ringgit, United States Dollar, and Others), Issuer Type (Sovereign, Corporate, Financial Institutions, Quasi-Sovereign, and Others), and Region 2024-2032”, offers a comprehensive analysis of the industry, which comprises insights on the sukuk market overview.
Global Sukuk Market Outlook:-
The global sukuk market size reached US$ 1,063.3 Billion in 2023. Looking forward, IMARC Group expects the market to reach US$ 3,619.3 Billion by 2032, exhibiting a growth rate (CAGR) of 14.1% during 2024-2032.
Factors Affecting the Growth of the Sukuk Industry:
- Islamic Financial Market Growth:
The expansion of the Islamic financial market is one of the primary drivers of the global sukuk market. Islamic finance adheres to Shariah principles, which prohibit interest (riba) and speculative activities. Instead, it emphasizes risk-sharing and asset-backed financing. As the Muslim population grows and the demand for Shariah-compliant financial products increases, sukuk, which are Islamic bonds, have become increasingly popular. They offer a way for investors to earn returns without violating Islamic laws. Islamic finance is gaining traction not just in Muslim-majority countries and also in Western markets. Financial hubs such as London, Hong Kong, and Luxembourg are positioning themselves as centers for Islamic finance, promoting sukuk issuances to attract a broader range of investors. This global acceptance and integration of Islamic finance into mainstream markets have significantly bolstered the sukuk market. Furthermore, governments and corporations in Muslim-majority countries are issuing sukuk to fund infrastructure projects and other developments, fueling market growth. The increasing sophistication and standardization of Islamic financial products are also making sukuk more attractive to conventional investors, further driving market expansion.
- Diversification of Investor Base:
The diversification of the investor base is another significant factor driving the sukuk market. Traditionally, sukuk were primarily purchased by Islamic financial institutions and investors from Muslim-majority countries. However, in recent years, there has been a notable shift. Institutional investors, including sovereign wealth funds, pension funds, and insurance companies from non-Muslim countries, are increasingly incorporating sukuk into their investment portfolios. This diversification is driven by several factors. Firstly, sukuk offer portfolio diversification benefits due to their low correlation with other asset classes. In an era of low-interest rates and economic uncertainty, investors are seeking alternative investments that can provide stable returns. Sukuk, being asset-backed and compliant with Islamic finance principles, tend to have lower default risks, making them an attractive option. Additionally, the ethical and socially responsible nature of sukuk aligns with the growing trend of sustainable and responsible investing (SRI). Investors are increasingly prioritizing environmental, social, and governance (ESG) criteria, and sukuk, which often fund infrastructure and development projects, meet these requirements. This growing interest from a diverse range of investors is expanding the sukuk market globally.
- Government Initiatives and Regulatory Support:
Government initiatives and regulatory support play a crucial role in the development of the sukuk market. Governments in various countries are actively promoting sukuk issuances to finance infrastructure and developmental projects. This is particularly evident in Gulf Cooperation Council (GCC) countries, Malaysia, Indonesia, and other Muslim-majority nations where governments are leveraging sukuk to fund national development plans and large-scale projects. Regulatory frameworks are evolving to support the issuance and trading of sukuk. In many jurisdictions, regulators are working to create a conducive environment for Islamic finance, including sukuk. This includes the establishment of clear guidelines for sukuk issuance, taxation incentives, and ensuring that the legal framework accommodates Shariah-compliant products. For instance, Malaysia has been at the forefront of developing a robust regulatory framework that supports the sukuk market, making it one of the largest sukuk issuers globally.
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Competitive Landscape:
The competitive landscape of the market has been studied in the report with detailed profiles of the key players operating in the market.
- Abu Dhabi Islamic Bank PJSC
- Al Baraka Banking Group
- Al-Rajhi Bank
- Banque Saudi Fransi
- Dubai Islamic Bank
- HSBC Holdings Plc
- Kuwait Finance House
- Malayan Banking Berhad
- Qatar International Islamic Bank
- RHB Bank Berhad
- Samba Financial Group
Sukuk Market Report Segmentation:
By Sukuk Type:
- Murabahah Sukuk
- Salam Sukuk
- Istisna Sukuk
- Ijarah Sukuk
- Musharakah Sukuk
- Mudarabah Sukuk
- Hybrid Sukuk
- Others
Murabahah sukuk holds the maximum number of shares due to its straightforward structure, which involves a cost-plus profit arrangement that is easily understood and implemented by both issuers and investors.
By Currency:
- Turkish Lira
- Indonesian Rupiah
- Saudi Riyal
- Kuwaiti Dinar
- Malaysian Ringgit
- United States Dollar
- Others
Malaysian Ringgit represents the largest segment due to the leading role of Malaysia in Islamic finance and its well-developed regulatory framework supporting the issuance and trading of sukuk.
By Issuer Type:
- Sovereign
- Corporate
- Financial Institutions
- Quasi-Sovereign
- Others
Sovereign dominates the market as governments frequently use sukuk to finance large-scale infrastructure projects and developmental initiatives, leveraging their creditworthiness and regulatory support to attract a broad base of investors.
Regional Insights:
- North America (United States, Canada)
- Asia Pacific (China, Japan, India, South Korea, Australia, Indonesia, Others)
- Europe (Germany, France, United Kingdom, Italy, Spain, Russia, Others)
- Latin America (Brazil, Mexico, Others)
- Middle East and Africa
South East Asia’s dominance in the sukuk market is attributed its well-established regulatory frameworks, significant government support, and the leading role of the region in the global Islamic finance industry, particularly in Malaysia and Indonesia.
Global Sukuk Market Trends:
The growing demand for infrastructure development is a significant factor driving the global sukuk market. Many emerging economies, particularly in Asia and the Middle East, are undergoing rapid urbanization and economic growth, leading to a substantial need for infrastructure investment. Governments and corporations are increasingly turning to sukuk as a financing tool for these large-scale projects, including transportation networks, energy plants, and social infrastructure such as schools and hospitals. Sukuk are particularly attractive for infrastructure financing because they are asset-backed, providing a direct link between the investment and tangible assets. This aligns with the risk-sharing principles of Islamic finance, making sukuk a suitable instrument for long-term projects. Additionally, the structured nature of sukuk allows for flexibility in design, accommodating various financing needs and ensuring compliance with Shariah principles.
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