Moody's: GCC and Malaysia to drive Islamic finance growth

Countries in the Gulf Cooperation Council (GCC) and Malaysia are helping drive growth in Shariah-compliant financial products, allowing Islamic finance to keep expanding in 2020 and beyond. Moody’s Investors Service, however, expects that the coronavirus outbreak may disrupt the issuance of sukuk.

“We expect sukuk issuance to remain stable at around $180 billion this year, and the takaful insurance market will see steady growth as insurance premiums pick up in newly penetrated markets,” Moody’s vice president senior credit officer Nitish Bhojnagarwala said.

“However, the downside risks are rising because of the coronavirus outbreak, as prolonged market disruption could dissuade issuers from coming to market,” Bhojnagarwala added.

Saudi Arabia will remain the world's largest Islamic banking market, while the sector will continue to expand rapidly in Malaysia. Moody’s is expecting the mergers between Islamic and conventional banks in the GCC region to drive one-off increases in assets, as they did in 2019.

There will be continued focus on the sukuk industry and increased issuance by the governments of the core Islamic finance markets. The deficit financing needs of some GCC sovereigns, amid weaker oil prices and higher sukuk refinancing, will also provide support.

Islamic banking penetration in the core Islamic financial markets of the GCC, Malaysia, Indonesia and Turkey increased to 31.2% in September 2019 from 25.5% in 2013, while the annual global sukuk issuance increased to $179 billion from $131 billion.

Re-disseminated by The Asian Banker

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