Sukuk Innovation Continued in 2020 amid Strong Growth

US$162.1 billion of sukuk were issued in 2019 compared to US$124.8 in 2018, representing market growth of 30% and consistent with growth over the past five years. Strong sovereign issuances by Indonesia, Malaysia and Saudi Arabia contributed to this growth whilst private sector issuances remained muted.

To cover fiscal needs due to slumped economic output resulting from the Covid-19 pandemic Indonesia and Malaysia continued to issue into 2020. Bahrain, Oman and Dubai also issued whilst Saudi Arabia issued sukuk worth US$18 billion if the first half of 2020.

It is expected market momentum will continue into 2021, as issuers lock in long-term funding at historically low rates. Sovereign Sukuk issuances continue to outstrip conventional bond issuance in Saudi Arabia and Malaysia.

Innovation in 2020

In August Malaysia innovated with a first digital retail sukuk which could be subscribed via digital channels. Innovations such as blockchain are expected to greatly automate the issuance of sukuk and lead to increased issuances with a retail as opposed to institutional focus.

In Taiwan, the Formosa sukuk market launched in 2019 after Taiwan permitted foreign borrowers to issue sukuk denominated in currencies other than the New Taiwan dollar saw Qatar Islamic Bank enter the market, issuing a US$800 million sukuk in January 2020 listed on the Taipei stock exchange.

Egyptian real estate developer entered the sukuk market with a US$127 million signalling the first corporate issuance in the country.

Airlines Restructure Sukuk due to Covid-19

The Indonesian national carrier Garuda Indonesia was forced to extend the maturity of its US$500 million sukuk by three years due to the drop in air travel due to the covid-19 pandemic. Malaysian Airlines similarly deferred by six months its US$362.5 million sukuk.