Today's Edition
KHALED AL KHAWALDEH (ABU DHABI)
The UAE sukuk market is thriving, with activity in the sector doubling to $8.6 billion in the first half of 2024, according to a new report provided to Aletihad by global credit rating agency Moody's Ratings.
According to the report, the surge in sukuk activity came as a result of overall higher volumes of issuances including a number of high-profile issuances from major financial institutions and companies in the country.
Sukuks are an increasingly popular form of Islamic financial certificates that are often likened to bonds in conventional finance but adhere to Islamic law (Sharia).
Instead of earning interest, which is prohibited in Islam, sukuk holders receive returns derived from the profit generated by underlying assets or ventures.
GCC governments and corporations have been increasingly issuing the financial instruments as part of an effort to develop capital markets and further diversify their economies.
GCC corporate and bank issuance volumes rose to a combined $19.6 billion in the first half of 2024, up from $11.6 billion a year earlier.
This was mainly led by Saudi Arabia, which made up 37 percent of all issuances globally in H12024.
The UAE made up 7 percent of issuances, making it one of the most active markets behind Saudi Arabia, Indonesia and Malaysia.
Nevertheless, the UAE stood out in its promotion of environmental, social, and governance (ESG) sukuks, or 'green Sukuks', where it led in new issuances in H1 2024 off the back of several high-profile corporate issuances.
This included Dubai Islamic Bank's issuance of $1 billion in sustainable sukuks and Aldar Investment Properties' $500 million inaugural green sukuk, as well as Emirates Islamic Bank's $750 million sustainable sukuk issuance in May.
In August, Bloomberg analysts told Aletihad that the UAE's 2050 Net Zero Goals, and the legacy left over by COP28 had facilitated a favourable environment for green Islamic finance to thrive.
Certainly, Moody's data shows a surge in green sukuk issuances in the UAE starting in 2022, exploding in 2023 and continuing into 2024.
Moody's expects the market for both green and normal sukuks to continue to grow, despite forecasting a slight slowdown in issuances towards the end of the year.
"We expect the sukuk market to continue to hold significant growth potential in the coming years, supported by the entrance of new issuers that will meet the increasing demand for sukuk instruments," Moody's said in the report.
"The pool of investors will continue to grow, thanks to the growing popularity of Islamic products beyond core Islamic markets, the rising demand for green and sustainable sukuk, and the increasing sophistication and diversity of Islamic instruments."
