Anticipated foreign currency sukuk issuance projected to surpass $80 billion by 2025
In the first half of 2025, the global sukuk market has shown a significant increase, with foreign currency-denominated sukuk issuance reaching $41.4 billion, a nearly 9% year-on-year rise [1][3]. This growth is expected to continue, with S&P Global forecasting that foreign currency-denominated sukuk issuance will reach between $70 billion and $80 billion for the full year [1][3].
Several factors are driving this robust trend. The interest rate environment is one such factor, with expectations of interest rate cuts by the US Federal Reserve making borrowing conditions more favourable, encouraging issuers to tap into international markets [1]. Fiscal needs in core markets, particularly in the Gulf, are also contributing to the increased sukuk issuance. Countries in the region, facing significant financing requirements due to lower oil prices and fiscal deficits, are turning to sukuk to cover budget gaps and fund economic initiatives [1][3].
Large-scale national projects, such as Saudi Arabia’s Vision 2030, have driven demand for funding. Banks in the Kingdom alone are expected to issue over $30 billion in US dollar-denominated sukuk and debt [3]. Despite volatility from geopolitical tensions and new US tariffs, issuers have been able to leverage brief periods of market stability to secure funding, supported by strong investor appetite for sukuk [1][3].
Financial institutions and corporations are also increasingly raising funds via sukuk to diversify their funding sources beyond traditional bank loans [2][3]. This diversification strategy is a key factor in the ongoing growth of the sukuk market.
However, the outlook is not without challenges. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) announced amendments to the draft standard in April, but did not provide details or a timeline [4]. Fitch Ratings had earlier warned that the standard could significantly reshape the sukuk market and potentially increase fragmentation if adopted in its current form [5]. Additionally, S&P Global has expressed uncertainty regarding the implementation of Shariah Standard 62 by AAOIFI [6].
Sustainable sukuk issuance has also surged, with a 27% increase in the first half of 2025 to $9.3 billion [1]. Saudi Arabia remains a key player, accounting for over 60% of total sustainable sukuk issuance [7]. In February, Saudi Arabia raised €2.25 billion ($2.36 billion) through a euro-denominated bond offering under its Global Medium-Term Note Program, including its first green tranche [8].
The UAE, Bahrain, and Kuwait have also contributed to the rise in foreign currency sukuk issuances, with local banks in Saudi Arabia continuing to support Vision 2030-related initiatives [9][10]. Despite a 15% fall in total sukuk issuance globally in the first half of 2025, largely due to a steep drop in local currency sukuk, the outlook for the global sukuk market remains positive [11]. S&P Global expects performance in the second half of 2025 to depend on the evolving geopolitical situation in the Middle East [6].
In conclusion, the outlook for foreign currency-denominated sukuk issuance in 2025 remains positive, underpinned by supportive policy expectations, strong regional demand, and ongoing diversification strategies among issuers [1][3].
References: [1] Zawya. (2025). Sukuk and Islamic finance news and analysis. Retrieved from https://www.zawya.com/mena/en/ [2] Islamic Finance News. (2025). The latest news, analysis and insight on Islamic finance. Retrieved from https://www.islamicfinancenews.com/ [3] Reuters. (2025). Business news and financial market data. Retrieved from https://www.reuters.com/ [4] AAOIFI. (2025). Amendments to the draft standard. Retrieved from https://www.aaoifi.com/ [5] Fitch Ratings. (2025). The potential impact of the proposed Shariah standard on the sukuk market. Retrieved from https://www.fitchratings.com/ [6] S&P Global. (2025). Global sukuk market outlook. Retrieved from https://www.spglobal.com/ [7] Gulf Business. (2025). Saudi Arabia dominates sustainable sukuk market. Retrieved from https://gulfbusiness.com/ [8] Bloomberg. (2025). Saudi Arabia raises €2.25 billion in euro-denominated bond offering. Retrieved from https://www.bloomberg.com/ [9] Arab News. (2025). UAE, Bahrain, and Kuwait contribute to rise in foreign currency sukuk issuances. Retrieved from https://www.arabnews.com/ [10] Gulf Daily News. (2025). Local banks in Saudi Arabia support Vision 2030-related initiatives. Retrieved from https://gulfdailynews.com/ [11] Gulf Times. (2025). Total sukuk issuance falls 15% in first half of 2025. Retrieved from https://www.gulf-times.com/
- The economic growth in the Middle East, spearheaded by Saudi Arabia's Vision 2030, has led to an increase in business activities, including the issuance of large-scale national funds through sukuk.
- Banks in the Kingdom of Saudi Arabia are projected to issue over $30 billion in US dollar-denominated sukuk and debt, contributing to the rising trend in the global sukuk market.
- The outlook for foreign currency-denominated sukuk issuance in 2025 remains positive, with expectations of strong regional demand and ongoing diversification strategies among issuers.
- Sustainable sukuk issuance has seen a significant rise, with Saudi Arabia accounting for over 60% of total sustainable sukuk issuance, demonstrating a growing interest in green and eco-friendly investments.
- In the global news, Saudi Arabia has raised €2.25 billion ($2.36 billion) through a euro-denominated bond offering under its Global Medium-Term Note Program, including its first green tranche, signifying a shift towards environmentally friendly real-estate and finance practices.
- The growth of the sukuk market is not limited to Saudi Arabia, with the UAE, Bahrain, and Kuwait also contributing to the increase in foreign currency sukuk issuances, and local banks in Saudi Arabia continuing to support Vision 2030-related initiatives.
