Local currency sukuk dominated issuances in 2021, accounting for 80 percent of all bonds issued, according to Fitch’s ‘Global Sukuk Outlook Dashboard: 2022.’
Fitch-rated sukuk reached $132.4 billion in 2021, 80.1 percent of which were investment-grade.
Meanwhile, the share of sukuk issuers with negative outlooks fell to 8.8 percent in the fourth quarter (4Q) of 2021, down from 23.4 percent in the corresponding quarter of 2020.
Fitch also expected the volume of sukuk to maintain its growth in 2022, maintaining its status as a key financing source in the Islamic finance market.
2021’s sukuk experienced growth despite the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) facing challenges in implementing standards, COVID-19 disruptions, and higher oil prices, according to Fitch.
“Growth will be anchored by robust Islamic investor appetite, funding diversification goals, and Islamic-finance development agendas in a number of countries. Downside risk stems from higher oil prices reducing a number of sovereigns’ funding needs, AAOIFI-compliance complexities, traditional risks such as interest-rate rise, lower global investor appetite for emerging-market debt, and political risk,” said Bashar Al-Natoor, the global head of Islamic finance at Fitch Ratings.
Malaysia, Indonesia, Turkey, and Pakistan issued a total of $230.2 billion of sukuk in 2021, while non-core market sovereigns such as the UK, Maldives, and Nigeria also issued sukuk.
The global outstanding sukuk volume also inched up by 12.7 percent in 2021 to reach $711.3 billion, according to Fitch.
Moreover, green and sustainable sukuk volumes expanded by 17.2 percent Y-o-Y in 2021 to post $15 billion and is expected to continue their growth in 2022.
Egypt and Islamic sukuk
Egypt is set to kick off its first issuance of Islamic sukuk and sustainable bonds in 2022 with the aim of diversifying its budget financial resources.
The country is expected to launch its first sukuk issuance during the 4Q of the current FY2021/2022 (April-June), with a total value of $1.25 billion, for the sake of financing the investment and development projects that are enrolled in the economic plan of the state’s budget, according to Minister of Finance Mohamed Maait.
Maait also said that the total values of the sukuk issuance will be set according to the latest updates on the global debt markets.
Meanwhile, Egypt’s Financial Regulatory Authority approved in November four new financing tools to be traded in the Egyptian capital market, including sustainable development bonds; social bonds; environmental, social, and governance bonds; as well as gender equality and women empowerment bonds.
In the same vein, Egypt issued its first green bonds in 2020 with a total sum of $750 million, which were offered in the local market as well as in the London Stock Exchange (LSE).
Maait stated that Egypt would issue its second set of green bonds in 2022.