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Islamic finance sector may grow by $2.2 trillion within two years

Islamic Finance Sector

The Islamic finance sector might achieve a growth of $2.2 trillion, between 10% -12% during the current and next years, Standard & Poor’s credit rating agency estimated.

The agency indicated that the sector recorded a growth of 10.6% in 2020, with the exception of Iran.

The Islamic finance sector should take full advantage of the opportunities associated with the comprehensive standardization of standards and increase its share in the sustainable financing activity, the agency said in a report.

Islamic Finance Sector

The report pointed out that coordination between various stakeholders will be the key to the success of the Islamic finance sector.

The agency noted to the importance of taking advantage of the opportunities related to the energy transition in the countries essential to Islamic finance and its social aspects.

The sector continued to grow in 2020, albeit at a slower pace than it was in 2019.

The sector’s assets grew by 10.6% in 2020, compared to 17.3% in 2019, when growth was supported by higher-than-expected sukuk issuances.

This performance explains the growth of Islamic banking assets in some countries of the Gulf Cooperation Council, Malaysia and Turkey, and the new issuance exceeds the due sukuk.

The rapid growth achieved by the Islamic finance sector in 2020 came despite the spread of the pandemic and the decline in oil prices, S&P Global indicated.

The agency pointed out that it excluded Iran from this year’s accounts due to the extreme fluctuations of the country’s currency in the parallel market, which makes the comparison with last year’s figures or any expectations less meaningful.

“Although we expect a modest recovery for most core Islamic finance countries in 2021-2022, we think that the sector will expand against the backdrop of continued standardization and integration”, the agency said.

Sukuk

On the sukuk front, S&P Global Credit Ratings expects total sukuk issuances to range between $140-155 billion this year.

This compares to a decline in sukuk issuances to $139.8 billion in 2020 from $167.3 billion in 2019.

The agency attributes its expectations for a high volume of issuances this year to the continued abundance of liquidity, the return of companies and governments to the market, and new issuances exceeding the due sukuk.

S&P indicated that the volume of issuances in the first quarter of 2021 increased by 1.4% in total and 22% if re-issuance of sukuk was excluded.

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