Moody's said new sukuk issuance volumes in 2016 are expected toremain flat at about $70 billion, but growth prospects for the Islamic financesector are still "strong," especially in countries where thepenetration of Islamic banking assets remains relatively low.
The rating agency noted that over the last three years, Oman'sIslamic banking sector has gone from zero to an aggregate of about 10% ofbanking system financing assets as of June.
Moody's said the drive of Gulf Cooperation Council governments totap conventional sources of liquidity, which has reduced the attractiveness ofthe sukuk format, contributed to subdued issuance volumes in 2016. However, theagency expects increased sukuk issuance into 2017 from sovereigns, banks andcorporates in the Gulf, as regional financing needs increase amid lower oilprices, Nitish Bhojnagarwala, an assistant vice president at the agency said.
Growth in the Islamic insurance sector is also slowing,according to Moody's, but is still expected to remain at double digit levelsinto 2017. The agency expects gross takaful contributions to reach $20 billionby 2017.
The agency said "persistent efforts" by governmentagencies and central banks, along with retail customer demand, is drivinggrowth in these markets and such a trend is anticipated to continue into thenext decade.