Persisting robustness in the global sukuk market amidst adjusting monetary policies
In the year 2025, the global Sukuk market is set to witness significant growth, driven by a host of key factors. The market is expected to be shaped by innovation in Sukuk structures, digitalization of Sukuk issuance, and enhanced regulatory frameworks, all contributing to market expansion and investor confidence.
The economic recovery, initiatives such as the Belt and Road, and the growing demand for sustainable and green Sukuk further fuel this forecast growth. The Islamic fintech sector's growth and the diversity of Sukuk structures also add to the market's dynamism.
Monetary policy shifts, domestic liquidity dynamics, and ongoing investments in infrastructure in core Islamic finance hubs like Saudi Arabia, UAE, Malaysia, and Indonesia are fundamental economic drivers shaping the market. Despite geopolitical tensions, these economic factors are expected to dominate market behavior, with minimal disruption to Sukuk issuance.
Regarding the local currency Sukuk segment, the outlook for 2025 is somewhat mixed. Foreign currency Sukuk issuance is robust, expected to reach $70-80 billion. However, the local currency segment is expected to decline during the second half of 2025 due to volatility in domestic debt markets and tighter monetary policy in several emerging economies.
Despite this decline, Sukuk remains a preferred financing instrument for sovereign and corporate issuers across the Middle East and Southeast Asia because of its appeal to Shariah-compliant investors. Dubai is notably strengthening its position as a global Islamic finance hub with over $80 billion in listed Sukuk by mid-2025.
Specific government bond and Sukuk auctions, such as Indonesia’s increased issuance targets in 3Q25 with strong investor demand, demonstrate the healthy supply-demand balance in domestic Sukuk markets, which is supportive even amid broader tight monetary conditions.
The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) is currently reviewing its standards related to Sukuk issuance, with the Shariah board in the process of amending a key standard. This move is expected to further boost investor confidence and market stability.
In summary, while the local currency Sukuk segment faces headwinds, it retains its importance in Islamic finance markets as a trusted and Shariah-compliant funding tool. The global Sukuk market is expected to maintain its resilience in 2025, with foreign currency-denominated issuance predicted to range between $70 billion and $80 billion. The market is well-positioned to navigate future economic headwinds while continuing to expand its global footprint.
- The growth of the global Sukuk market in 2025 is anticipated, driven by factors such as the Belt and Road initiatives, increasing demand for sustainable Sukuk, and innovations in Sukuk structures.
- Economic drivers like monetary policy shifts, domestic liquidity dynamics, and investments in infrastructure in countries like Saudi Arabia, UAE, Malaysia, and Indonesia are shaping the Sukuk market, despite geopolitical tensions.
- The local currency Sukuk segment's outlook for 2025 is somewhat mixed, with foreign currency Sukuk issuance expected to reach $70-$80 billion, but a decline in the local currency segment due to volatility in domestic debt markets and tighter monetary policy in some emerging economies.
- Sukuk remains a preferred financing instrument for issuers in the Middle East and Southeast Asia because of its appeal to Shariah-compliant investors, with Dubai strengthening its position as a global Islamic finance hub.
- Government bond and Sukuk auctions, such as Indonesia’s increased issuance targets in 3Q25 with strong investor demand, demonstrate a healthy supply-demand balance in domestic Sukuk markets, supporting growth even amid tight monetary conditions. Additionally, the AAOIFI's review of Sukuk issuance standards is expected to further boost investor confidence and market stability.
