KUALA LUMPUR, Feb 23 — Moody’s Investors Service expects global sukuk issuance will stabilise this year to around US$190 billion-US$200 billion (RM768 billion-RM808 billion) following record issuance of nearly US$205 billion in 2020.

Its vice president and senior analyst Ashraf Madani said the Gulf Cooperation Council (GCC) sovereigns would increasingly turn to sukuk issuance given high financing needs due to moderate oil prices and wide fiscal deficits.

“Corporate issuance, however, will remain limited because of more attractive conventional market opportunities, while new financial institutions will boost sukuk issuance in the sector,” he said in a newly published report.

Ashraf said Islamic banking, sukuk and takaful would benefit from supportive government policies in many countries and strong demand for Shariah-compliant products despite pandemic challenges.

“We expect Islamic finance to continue rising in 2021 and beyond, maintaining its now long-established growth trend.

“The industry generally remains underrepresented in countries with large Muslim populations, providing ample room to expand,” he said.

Ashraf said penetration in the core Islamic financial markets of the GCC, Malaysia (A3 stable), Indonesia (Baa2 stable) and Turkey (B2 negative) rose to 32.8 per cent in September 2020, from 31.4 per cent in 2019 and 25.5 per cent in 2013.

Moody’s also expects the takaful market to expand steadily as premiums rise moderately in the next two to three years in newly penetrated markets as conducive digitisation and regulatory improvements will also help to lift growth.

The rating agency said global Islamic funds under management would continue to grow, likely at an annual rate of four per cent to five per cent in 2021-2022, boosted by the growth of Shariah capital markets and resilient demand for Shariah-compliant investments.

In another development, it said mergers between Islamic and conventional banks in the GCC, where surviving entities are Islamic banks, could also drive one-off increases in assets.

The report said Saudi Arabia (A1 negative) would remain the world’s largest Islamic banking market, while the sector would continue to expand in Malaysia.

Oman (Ba3 negative) and Turkey will also continue to grow rapidly in Islamic banking, according to the report. — Bernama