Saudi banking system to underpin Islamic finance market growth: S&P Global Ratings

Saudi banking system to underpin Islamic finance market growth: S&P Global Ratings

RIYADH: The Islamic finance industry is forecast to grow in 2023-2024 thanks to Saudi Arabia’s strong banking system, according to a new report from S&P Global Ratings.

The US-based agency expects around 10 percent growth across the industry in 2023-2024 after seeing a similar expansion in 2022, with the Kingdom and Kuwait largely fueling last year’s rise.

S&P Global Ratings also believe that despite a predicted economic slowdown and a decline in sukuk issuance this year, new supplies of the product will exceed those set to mature.

The report echoes findings from US-based Fitch Ratings released in April, which claimed the global sukuk issuance for the second quarter of 2023 is building up even as it faces short-term uncertainties amid continued macro-volatilities.

In its report, S&P Global Ratings said: “We expect a material slowdown in GCC (Gulf Cooperation Council) economies' real GDP (gross domestic product) growth in 2023-2024, compared with 2022, largely based on lower oil production.

“However, we think that Saudi Arabia’s banking system performance will continue to underpin a large portion of the expanding Islamic finance industry.

“In other GCC countries, growth of about 5 percent appears plausible in the absence of new major government investment cycles.”

The report argues that Islamic finance is still