Moody’s predict steady growth in global Islamic finance

Moody’s credit rating agency anticipates continued growth in global demand for Islamic finance this year, driven by strong economic activity in the Gulf and Southeast Asia. This momentum is supported by economic diversification plans, rising investment flows, and increasing population growth in key markets.

However, in its report, the agency projected a decline in sukuk issuances to a range of $210 to $220 billion this year. This decrease is attributed to a drop in sovereign bond issuances, reduced sukuk refinancing needs, and expectations that Saudi Arabia’s liability management process will not be repeated in 2025.

Moody’s noted that financial companies and institutional sectors are expected to partially offset the decline in sukuk issuances, driven by anticipated global interest rate cuts. The agency also highlighted the continued growth potential of green and sustainable sukuk, despite a 10.6% drop in issuances in 2024 to $9.5 billion.

Furthermore, Moody’s expects green and sustainable sukuk issuances to remain stable in 2025, driven by the ongoing commitment of Gulf issuers to environmental, social, and corporate governance sustainability plans. Additionally, growing interest from both local and international investors is expected to support demand for these sukuks.

Moody’s also noted that demand for Islamic investment funds remains strong in 2025, with potential mergers and acquisitions in the Takaful insurance sector.

The agency expects Takaful premiums in Gulf countries to experience moderate growth over the next two to three years, driven by regional economic expansion and rising demand for medical and other mandatory insurance products.

Source: Al Qabas