![]() 1, 2023, seven out of 27 EU member states are yet to adopt the euro. Today is Wednesday, May 17, 2023, and here is today’s essential intelligence.Įuro Adoption: After Croatia, Who's Next?įollowing Croatia's accession on Jan. “We believe that this will change, and we expect to see higher volumes of sustainability-linked sukuk as issuers try to meet investor demand and core Islamic finance countries seek to reduce their carbon footprint and support the global energy transition,” S&P Global Ratings analysts said. These principles share some links with environmental, social and governance considerations. Sharia prohibits excessive interest, uncertainty of payout, gambling, speculation and investment in forbidden industries such as alcohol and tobacco. To be sharia-compliant, financial institutions must share the risks and rewards of a transaction with their clients. ![]() Sustainability-linked sukuk issuance also remains limited, though Islamic and sustainable finance are naturally aligned. ![]() "If sukuk became an equity-like instrument, we believe that investor and issuer appetite, as well as pricing mechanisms, would likely change significantly," S&P Global Ratings said in its report. Given its high concentration in the Middle East and Southeast Asia, S&P Global Ratings views Islamic finance as more “a collection of local industries rather than a truly globalized sector.” Greater standardization, partly through the digitalization of sukuk issuance, is needed to widen Islamic finance’s geographical and market appeal. Notwithstanding its growth pace, Islamic finance is still finding its footing globally and is hindered by structural weaknesses. Issuers with elevated capital requirements, including in Egypt and Turkey, will likely turn to the sukuk market. Issuance volumes are expected to come from corporates, particularly in countries implementing transformation initiatives such as Saudi Arabia's Vision 2030. Although new issuances are predicted to drop in 2023, they will continue to exceed maturing sukuk. The issuance of sukuk - an Islamic finance certificate akin to a bond - is also a major driver. Generally modest growth in banking assets is expected in Egypt and Turkey despite pressure on the Egyptian pound and depreciation of the Turkish lira. In Southeast Asia, Islamic banking is forecast to see an uptick of about 8% in the next couple of years, even as Malaysia and Indonesia face an economic slump. Although Saudi Arabia is poised for an economic slowdown due to reduced oil production, the country is set to remain a major growth contributor to the Islamic finance industry. The Gulf Cooperation Council countries, particularly Saudi Arabia and Kuwait, accounted for 92% of the increase in Islamic banking assets in 2022. The Islamic finance market's upward trajectory was buoyed mainly by growth in banking assets. This outperformance was mainly spurred by increased exposure to IT stocks within Islamic indexes, which were up 22.6% in the first quarter, and the lack of exposure to conventional banks and financial services, which experienced turmoil during the period. The S&P Global BMI Shariah index rose 3.5% and the Dow Jones Islamic Market World Index increased 3.4% during the first quarter, outperforming conventional benchmarks. From 2023 to 2024, this sector is projected to grow at a rate of about 10%, according to an S&P Global Ratings report. It has been on the upswing in recent years, with assets managed by sharia-compliant financial institutions crossing the $3 trillion mark in 2022. ![]() Islamic finance, which operates in compliance with sharia, or Islamic law, is a rapidly expanding segment of the global financial market. While the global economy braces for a slowdown over the next couple of years, Islamic finance looks set for steady growth. Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.
0 Comments
Leave a Reply. |