Global Islamic finance has reached a monumental milestone as cumulative issuances of Sharia-compliant bonds, known as sukuk, officially crossed the historic US$ 1 trillion threshold. This significant achievement comes on the heels of decades of steady growth, market maturation, and expanding investor interest since the inception of the modern sukuk market in 1996.
The milestone underscores the resilience and increasing global integration of Islamic capital markets, which offer an alternative financial instrument that aligns with Islamic law by prohibiting the charging and paying of interest, while requiring a tangible underlying asset. Over the decades, sukuk have evolved from a niche financial product into a mainstream asset class utilized by sovereign governments, multilateral institutions, and corporate entities alike to fund infrastructure projects, budget deficits, and corporate expansion.
According to data compiled up to the end of 2018, the global market for outstanding sukuk stood at an impressive US$ 469.7 billion, distributed across 2,887 distinct sukuk instruments. Market activity remained robust during 2018, with annual issuances reaching US$ 124.8 billion. This strong performance demonstrated steady momentum, matching the robust issuance levels recorded in the previous year and highlighting sustained demand for Sharia-compliant liquidity management tools despite fluctuating macroeconomic conditions and shifting global monetary policies.
Saudi Arabia and Malaysia Lead Global Issuances
Geographically, the momentum of the market in 2018 was heavily propelled by sovereign activity in key Islamic finance hubs. The governments of Saudi Arabia and Malaysia emerged as the largest sovereign issuers of sukuk during the year, spearheading market expansion with issu
ances totaling US$ 17.1 billion and US$ 13.9 billion, respectively.
These insights and figures were detailed in the highly anticipated Islamic Finance Development Indicator (IFDI) report for 2019. The comprehensive report was produced by the Islamic Corporation for the Development of the Private Sector (ICD), which operates as the private sector arm of the multilateral Islamic Development Bank (IsDB) Group. The report serves as a benchmark for the industry, tracking the health, growth, and regulatory developments of Islamic financial markets across multiple jurisdictions.
Malaysia successfully maintained its longstanding lead position in terms of overall issuance volume, a performance significantly bolstered by the strategic return of short-term murabaha sukuk issued by the country’s central bank, Bank Negara Malaysia. The resumption of these short-term issuances marked a pivotal moment for the domestic market, as the central bank re-entered the sukuk issuance arena following a notable three-year hiatus.
Market observers noted that the reintroduction of these instruments played a crucial role in providing liquidity management options for Islamic financial institutions operating within the region. Demonstrating its commitment to supporting a deep and liquid domestic Islamic money market, Bank Negara Malaysia moved swiftly upon its return, issuing a substantial US$ 16.1 billion in short-term sukuk during the second half of 2018 alone. This strategic revival not only reinforced Malaysia’s foundational role in the global Islamic finance architecture but also provided the necessary market depth to sustain high issuance volumes through the end of the year.