Global Islamic finance forecast to grow as main markets recover

DUBAI, Could 3 (Reuters) – The $2.2 trillion world Islamic finance business is predicted to develop 10%-12% over 2021-2022 resulting from elevated Islamic bond issuance and a modest financial restoration in the principle Islamic finance markets, S&P International Scores stated.

The business continued to develop final yr regardless of the COVID-19 pandemic, though at a decrease tempo than in 2019, with world Islamic belongings increasing by 10.6% in 2020 in opposition to development of 17.3% the earlier yr.

Islamic finance, which bans curiosity funds and pure financial hypothesis, has been on the rise for a few years throughout markets in Africa, the Center East and Southeast Asia, nevertheless it stays a fragmented business with uneven implementation of its guidelines.

“Over the following 12 months, we may see progress on a unified world authorized and regulatory framework for Islamic finance … we imagine that such a framework may assist resolve the dearth of standardisation and harmonisation that the Islamic finance business has confronted for many years,” S&P stated on Monday.

The business is predicted to obtain some help within the coming two years in Saudi Arabia, the place mortgages and company lending are anticipated to rise because the nation pushes forward with plans to diversify the economic system.

Investments in Qatar for the 2022 soccer World Cup and the Expo occasion in Dubai later this yr are additionally anticipated to help development.

The scores company forecast world issuance of Islamic bonds, or sukuk, to succeed in $140-155 billion this yr, up from roughly $140 billion in 2020, because of plentiful liquidity and sustained financing wants amongst corporates and governments.

S&P additionally highlighted that the complete affect of the coronavirus disaster has but to materialise and extra requests for sukuk restructurings and maturity extensions, in addition to greater default charges, are anticipated this yr.

“We see stress on actual property builders, given the drop in actual property costs within the GCC (Gulf Cooperation Council) and constructing dangers within the industrial actual property sector,” S&P stated.

“Equally, corporations associated to aviation, tourism, journey, and hospitality – sectors which have been severely hit by COVID-19 – will take a number of quarters to get well to prepandemic ranges.”

(Reporting by Davide Barbuscia. Enhancing by Jane Merriman)