May 14, 2021

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Global Islamic finance grows as major markets recover

Dubai: The global Islamic finance industry of $ 2.2 trillion (RM9 trillion) is expected to grow by 10% to 12% over the 2021-2022 period due to increased Islamic bond issuance and modest economic recovery in Islamic finance markets, Standard & Poor’s credit rating agency said. Main.

The industry continued to grow last year despite the Covid-19 pandemic, although at a slower pace than in 2019, with global Islamic assets expanding 10.6% in 2020 versus 17.3% growth the previous year.

Islamic finance, which prohibits interest payments and purely monetary speculation, has been on the rise for many years across markets in Africa, the Middle East, and Southeast Asia, but it remains a fragmented industry with uneven enforcement of its rules.

“Over the next twelve months, we can see progress in a unified global legal and regulatory framework for Islamic finance … We believe that such a framework can help solve the lack of standardization and harmonization that the Islamic finance industry has faced for decades,” S&P said. Monday.

The industry is expected to receive some support in the next two years in Saudi Arabia, where mortgage and corporate lending are expected to rise as the country presses ahead with its plans to diversify the economy.

Investments in Qatar for the 2022 FIFA World Cup and Expo in Dubai later this year are also expected to support growth.

The rating agency expects the global issuance of Islamic bonds, or sukuk, to reach $ 140-155 billion this year, up from nearly $ 140 billion in 2020, thanks to abundant liquidity and ongoing financing needs between companies and governments.

S&P also highlighted that the full impact of the Coronavirus crisis has not yet materialized, and more requests for sukuk restructuring and maturity extensions are expected this year, as well as higher default rates.

“We see pressure on real estate developers due to low property prices in the GCC countries and construction risks in the commercial real estate sector,” S&P said.

“Likewise, companies related to aviation, tourism, travel and hospitality – the sectors hit hard by Covid-19 – will take several quarters to recover to pre-pandemic levels.”