Islamic finance sector needs to unlock its long-term potential – The National

Islamic finance sector needs to unlock its long-term potential – The National

A higher degree of standardisation would support the growth of Islamic finance and reduce discrepancies between jurisdictions

















The global Islamic finance industry will grow at a slower pace this year, according to S&P Global Ratings. Faisal Al Nasser/Reuters







The Covid-19 pandemic has caused significant disruption to the global economy and financial markets, including the global Islamic finance industry. Lower oil prices, measures introduced to contain the spread of the virus and incentives to unlock bank liquidity have had a particularly negative impact on the industry and its different components.



Uncertain times naturally result in both governments and investors adopting a more risk-averse approach although lately we have started to observe some relaxation. A need for immediate funds amid the pandemic, and complexity related to sukuk issuances have pushed governments in core countries towards conventional markets to secure finance. As a result, the volume of sukuk issuance fell 38 per cent below the level it reached in the first five months of 2019.



Although we expect sukuk issuance to recover from the third quarter of 2020 onwards, this is unlikely to compensate for the first-half decline. We forecast around $100 billion