Moody's said it expects Islamic finance will continue to expand in 2021 and beyond, boosted by supportive government policies, strong product demand and deeper market penetration, despite challenges from the coronavirus pandemic.
Penetration in the core Islamic financial markets of the Gulf Cooperation Council, Malaysia, Indonesia and Turkey rose to 32.8% in September 2020, from 31.4% in 2019.
The rating agency expects global sukuk issuance to stabilize in 2021 to around $190 billion to $200 billion, following record issuance of nearly $205 billion in 2020.
Moody's said GCC sovereigns will increasingly turn to sukuk issuance given high financing needs due to moderate oil prices and wide fiscal deficits.
However, corporate issuance will remain limited because of more attractive conventional market opportunities, while new financial institutions will boost sukuk issuance in the sector.
Moody's expects the takaful insurance market to expand steadily as premiums rise moderately in the next two to three years in newly penetrated markets.
Growth in global Islamic funds under management will continue at a likely annual rate of 4% to 5% in 2021-2022, the rating agency said.
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