As per a latest report compiled by the S&P Global Ratings Agency, the overall globalized Islamic Finance sector is all poised to progress at 10-12 percent within the 2021-22 time frame all due to the outcome of advanced sukuk issuance as well as the modest economic recovery background in the core Islamic Finance Market.
The Head of Islamic Finance at S&P’s Global Ratings, Mohamed Damak, stated out that; “Islamic finance grew rapidly in 2020, albeit at a slower pace than in 2019, despite the double shock from the pandemic and the drop in the oil price. As well as although we expect a modest recovery for most core Islamic finance countries in 2021-22, we think that the sector will expand against the backdrop of continued standardization and integration.”
S&P Global Ratings divulged out that the $2.2 trillion business sustained to nurture at a gentler pace the preceding year despite the onslaught of the Covid-19 pandemic. Global Islamic assets magnified out by 10.6 percent the preceding year against growth of 17.3 percent in 2019 as the pandemic interrupted the intensifying trend due to slumpdown within the global economy due to twin threats of Pandemic as well as the Oil rates slumping down trend.
The industry is anticipated to receive some provision in the coming two years in Saudi Arabia, where mortgages and corporate lending are anticipated to upsurge as the nation impetuses ahead with tactics to diversify the economy. Investments in Qatar for the 2022 soccer World Cup and the Expo event in Dubai later this year are also anticipated to provision the economic expansion.
“Over the next 12 months, we could see progress on a unified global legal and regulatory framework for Islamic finance that the Dubai Islamic Economy Development Centre and its partners are developing. Depending on the outcome and its adoption, we believe that such a framework could help resolve the lack of standardisation and harmonization that the Islamic finance industry has faced for decades,” Damak stated out.
Islamic finance, which bans interest payments as well as pure financial speculation, has been on the intensification drive for many years across markets in the Africa, the Middle East and as well as the Southeast Asia, but it remains an uneven industry with rough implementation of its guidelines.
Upsurge in Sukuk Issuance
The ratings agency estimated that the global issuance of Islamic bonds, or sukuk, to range $140-155 billion this year, up from roughly $140 billion in 2020, all cheers to copious liquidity and constant financing requirements among corporates and governments.
S&P also emphasized that the full impression of the coronavirus catastrophe has yet to materialize and more requirements for sukuk rearrangements and maturity extensions, as well as higher evasion rates, are predictable this year.
“We see pressure on real estate developers, given the drop in real estate prices in the GCC (Gulf Cooperation Council) and building risks in the commercial real estate sector. Similarly, companies related to aviation, tourism, travel, and hospitality — sectors that have been severely hit by Covid-19 — will take several quarters to recover to prepandemic levels,” S&P said.
“We have excluded Iran from our statistics this year owing to the extreme volatility of the country’s currency in the parallel market (as disclosed by the Central Bank of Iran), which makes comparison with last year’s numbers or any forecasts less meaningful,” the rating agency stated out further.