Dubai, Western financial institutions and investors are becoming increasingly comfortable with sukuk structures, and by the turn of this decade the total sukuk issuance is expected to exceed $100 billion, according to global rating agency Standard & Poor's.
Sharia-compliant assets worldwide are now close to an estimated $500 billion and have been growing at more than 10 per cent per year over the past 10 years, placing Islamic finance in a global asset class all of its own.
According to the report, in the Gulf and Muslim Asia, an estimated 20 per cent of banking customers would now spontaneously choose an Islamic financial product over a conventional one with a similar risk-return profile.
"The market share of Islamic banks currently stands at 12 per cent in Malaysia and 17 per cent in the six GCC countries. Retail banking services and issuance of Islamic notes, or sukuk, have been and will continue to be frontrunners in the global Islamic finance boom," the rating agency said.
While Islamic finance will continue to expand both geographically and in terms of products offered, the newly created Shariah-compliant instruments are set to rival product offerings at conventional banks, another report said.
The combined value of Islamic bonds, or sukuk, sold since the emergence of an Islamic finance industry 30 years ago is estimated at about $70 billion now.
“Sukuk are now a mainstay in asset allocation in Malaysia and the Gulf countries. The non-Muslim world is also honing in on sukuks, with issuers aiming to tap surplus liquidity flowing from the Gulf region,” analysts Anouar Hassoune and Mohamed Damak said in the report.
A record $16.8 billion of Islamic bonds were sold worldwide last year, more than double the $7.6 billion issued in 2005, according to data compiled by Bloomberg. The UK may sell its first-ever Islamic bonds to woo oil funds from the Middle East.
Islamic finance will continue to expand, both geographically and in terms of products offered, and newly created Sharia-compliant instruments are set to rival product offerings at conventional banks, according Standard & Poor's.
"Mounting demand around the world for Sharia-compliant financial products and services is fueling the Islamic banking industry's buoyant expansion," said Standard & Poor's credit analyst Anouar Hassoune.