Introduction
The global sukuk market is experiencing a significant transformation, propelled by a surge in demand for Islamic finance solutions. According to the TechSci Research report, titled “Global Sukuk Market – Industry Size, Share, Trends, Competition Forecast & Opportunities, 2029,” the global sukuk market reached a market value of USD 1,021.6 billion in 2023 and is poised to expand further with a compound annual growth rate (CAGR) of 12.6% during the forecast period of 2025-2029. Sukuk, often referred to as Islamic bonds, have rapidly evolved into a key component of the global financial ecosystem due to their compliance with Sharia law and their ability to offer ethical investment opportunities.
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Sukuk have gained widespread popularity as they cater to the growing demand for socially responsible investment options. By adhering to the principles of Islamic finance, sukuk provide an alternative to conventional financial products. The market for sukuk is also diversifying, not only in terms of the range of issuers but also with the incorporation of innovative structures such as green and sustainable sukuk. These factors are transforming the landscape of sukuk and elevating its role in global finance.
This report provides a comprehensive analysis of the global sukuk market, exploring key trends, market drivers, and challenges, along with a competitive analysis of key players operating in the market. The sukuk market’s expansion is underpinned by a complex mix of economic, financial, and regulatory factors that are helping to shape the industry’s future.
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Industry Key Highlights
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Market Growth and Size The global sukuk market stood at USD 1,021.6 billion in 2023 and is expected to experience robust growth, with an anticipated CAGR of 12.6% during the 2025-2029 forecast period. This growth reflects the increasing adoption of Islamic finance principles, along with the market’s broadening appeal across different geographical regions and investor segments.
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Diverse Issuers The sukuk market has evolved beyond its traditional stronghold of sovereign issuers. Corporations and financial institutions are increasingly embracing sukuk to meet their financing needs. This diversification of issuers is a key factor contributing to the market’s resilience and growth, providing investors with a wider range of options.
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Global Investor Interest Investor interest in sukuk is no longer confined to Islamic countries. Investors from across the globe, including institutional investors, sovereign wealth funds, and banks, are becoming increasingly attracted to sukuk due to their ethical nature, stability, and predictable returns. The global appeal of sukuk highlights its ability to function as a mainstream financial instrument.
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Regulatory Support Countries with significant Islamic finance markets have strengthened their regulatory frameworks to facilitate sukuk issuance. This regulatory support, coupled with ongoing efforts towards standardization, is enhancing the overall efficiency of the sukuk market, ensuring legal clarity and investor protection.
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Technology Integration Sukuk structures are becoming more sophisticated, with technology integration playing a prominent role. The rise of Islamic fintech has enabled sukuk to be issued more efficiently and has opened new avenues for cross-border issuance, expanding the scope and reach of these financial products.
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Sustainable and Green Sukuk The global sukuk market is increasingly incorporating green and sustainable elements. This trend is expected to continue as investors and governments seek financing mechanisms for projects that promote environmental sustainability and socially responsible investment practices.
Emerging Trends in the Global Sukuk Market
The sukuk market is undergoing several emerging trends that are reshaping the way sukuk is structured and issued, contributing to its broader acceptance in global finance.
1. The Rise of Green and Sustainable Sukuk
One of the most significant trends within the sukuk market is the rise of green and sustainable sukuk. These sukuk are specifically designed to finance projects with positive environmental and social impacts, such as renewable energy, clean technology, and sustainable infrastructure. This trend aligns with the growing global emphasis on sustainable development and responsible investing. The issuance of green sukuk is expected to gain momentum as investors increasingly prioritize environmental, social, and governance (ESG) factors in their investment decisions.
2. Technological Advancements and Digitalization
The integration of technology and digital platforms has revolutionized the sukuk market. Sukuk issuance, trading, and management processes are becoming more efficient through the use of blockchain technology, smart contracts, and digital platforms. This digital transformation enhances transparency, reduces transaction costs, and improves the speed at which sukuk can be issued and traded across borders.
3. Cross-Border Sukuk Issuance
The sukuk market has seen a marked shift towards cross-border issuances, as investors from different regions increasingly recognize the potential of sukuk as a global financial instrument. Non-Muslim-majority countries, especially in Europe and Asia, have participated in sukuk issuance, further broadening the market’s scope and appeal. Cross-border sukuk issuance is facilitating the flow of capital into emerging markets and enabling governments and corporations to raise funds for critical infrastructure projects.
4. Corporate Sector’s Increased Engagement
Historically, sukuk issuance was dominated by sovereign governments. However, the corporate sector is increasingly turning to sukuk to finance their growth and expansion. Corporations are recognizing sukuk as a versatile tool for raising capital while adhering to Islamic finance principles. This trend is expected to grow as more corporations seek alternative, ethical financing solutions.
5. Standardization Efforts and Regulatory Developments
Regulatory frameworks in key sukuk markets are evolving to enhance clarity and ensure investor protection. Regulatory bodies and organizations such as the International Islamic Financial Market (IIFM) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) have been at the forefront of standardizing sukuk structures, making it easier for issuers and investors to navigate the market. Efforts towards standardization are likely to continue, enhancing the credibility and liquidity of sukuk in the global market.
Drivers of Growth in the Global Sukuk Market
Several factors are driving the growth of the global sukuk market, making it an increasingly attractive financial instrument for investors and issuers alike.
1. Escalating Demand for Islamic Finance
The increasing demand for ethical and socially responsible investment products has been a key driver of sukuk market growth. Islamic finance, which adheres to Sharia law and emphasizes ethical investment practices, has become more mainstream. As more investors seek investments that align with their ethical values, the sukuk market is experiencing greater demand from both Islamic and non-Islamic investors.
2. Infrastructure Financing Needs
Governments, particularly in emerging markets, are turning to sukuk to finance large-scale infrastructure projects. Sukuk are seen as an effective way to fund projects such as roads, bridges, airports, and other critical infrastructure, which is essential for economic development. The growing need for infrastructure financing in developing countries is expected to drive further sukuk issuance, especially in markets with significant Islamic finance activity.
3. Diversification of Issuers
The diversification of sukuk issuers has expanded the market significantly. While sovereign issuers continue to dominate, more corporations and financial institutions are issuing sukuk to meet their funding needs. This diversification provides a wider range of investment opportunities, appealing to a broader pool of investors.
4. Global Investor Interest
Sukuk are gaining global traction, not just in traditional Islamic finance markets but also in non-Muslim-majority countries. Sovereign wealth funds, institutional investors, and even central banks are increasingly incorporating sukuk into their investment portfolios due to their ethical appeal, stability, and favorable risk-return profile.
5. Supportive Regulatory Frameworks
Countries with strong Islamic finance infrastructure are providing favorable regulatory environments for sukuk issuances. Governments are implementing legal frameworks that promote sukuk issuance by providing clear guidelines, tax incentives, and investor protection. These favorable conditions are crucial in driving sukuk market expansion.
Challenges in the Global Sukuk Market
Despite its robust growth, the global sukuk market faces several challenges that could impact its future development.
1. Lack of Standardization
One of the main challenges facing the sukuk market is the lack of a unified global standard for sukuk issuance. Different countries and jurisdictions have different rules and regulations governing sukuk, making it difficult for issuers and investors to navigate the market. Efforts are being made to address this issue, but the lack of standardization remains a significant obstacle.
2. Limited Secondary Market Liquidity
The sukuk market suffers from limited liquidity in the secondary market. Many sukuk instruments are held until maturity, limiting the ability of investors to trade them on the open market. The development of a more liquid secondary market is crucial for enhancing the attractiveness of sukuk for investors.
3. Regulatory and Tax Complexities
The regulatory and tax treatment of sukuk varies widely between jurisdictions, leading to complexities for issuers and investors. These complexities can create barriers to entry for new issuers and deter some investors from participating in the market.
4. Educational Gaps
There is a general lack of awareness and understanding of sukuk among investors, particularly in non-Islamic countries. Educational efforts to raise awareness about the benefits and mechanics of sukuk are necessary to attract a broader pool of investors and issuers to the market.
Competitive Analysis of the Global Sukuk Market
The competitive landscape of the global sukuk market includes a diverse range of participants, including Islamic banks, financial institutions, and corporations. Some of the key players in the market include:
- Abu Dhabi Islamic Bank PJSC
- Al Baraka Banking Group
- Al-Rajhi Bank
- Banque Saudi Fransi
- Dubai Islamic Bank
- HSBC Holdings Plc
- Kuwait Finance House
- Malayan Banking Berhad
- Qatar International Islamic Bank
- RHB Bank Berhad
These players compete for market share by offering a variety of sukuk structures, including Murabahah, Salam, Istisna, Ijarah, Musharakah, and Mudarabah sukuk. As the market continues to grow, competition among these institutions is expected to intensify, with players focusing on offering innovative sukuk structures, expanding their geographical presence, and improving customer experience through digital platforms.
Future Outlook
The future of the global sukuk market appears promising. As the demand for ethical and socially responsible investments continues to rise, sukuk will remain a key financial instrument. The market’s growth will be driven by factors such as increasing global investor interest, the diversification of issuers, the rise of green and sustainable sukuk, and supportive regulatory frameworks. However, challenges such as lack of standardization, limited liquidity, and regulatory complexities will need to be addressed to ensure the long-term sustainability of the market.
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