LONDON: Saudi management within the Islamic finance economic system seems to be set to proceed into 2021, in keeping with a senior trade knowledgeable, who defined that the tip of the GCC rift and rising emphasis on inexperienced finance each increase the Kingdom’s credentials.
“The area, and particularly I’d say Saudi Arabia, is main the Islamic finance market globally,” Fitch Rankings’ International Head of Islamic Finance Bashar Al-Natoor advised Arab Information.
“Though Islamic finance is small globally, it’s vital within the Center East, and it is extremely vital in Saudi Arabia.”
Throughout the 5 key sectors of Islamic finance — Islamic banks, Sukuk, Takaful, fund administration and Sharia-compliant company sectors — Saudi Arabia was traditionally identified solely to steer in international locations the place there was twin Islamic and traditional financing.
Nevertheless, Al-Natoor stated, that is now altering.
The Kingdom has began to steer the Sukuk market: “The Kingdom has beforehand carried out the biggest ever Sukuk providing internationally — we count on this development to proceed.”
Saudi Arabia can be chasing the highest spot within the fund administration sector, the place, alongside Malaysia, it has essentially the most fund managers devoted to Islamic finance.
Throughout Sukuk, fund administration, Takaful, and the broader Islamic finance world, Al-Natoor stated “you discover that Saudi Arabia is main.”
One improvement that has contributed to Saudi Arabia’s pre-eminence in Islamic finance is the tip of the GCC-Qatar rift.
The normalization of ties between the GCC bloc and Qatar, Al-Natoor defined, not solely elevated buyers’ confidence within the area and eradicated a political threat, but in addition offered a fabric increase to the Sukuk market.
“With the tip of the GCC-Qatar rift, we count on Qatari sovereign entities to slowly re-enter the broader Sukuk market,” Al-Natoor stated.
He stated the comparatively shallow investor pool for Sukuks, in contrast with conventional bonds, signifies that, for Qatari entities, the significance of accessing the Saudi Arabian and Emirati markets are much more vital.
Along with the favorable political situations which have cemented Saudi management in Islamic finance, their expertise in sustainable, inexperienced finance will even be instrumental sooner or later.
Saudi Arabia, Al-Natoor stated, issued its first ever inexperienced Sukuk final 12 months when the Saudi Electrical Firm issued over $1.3 billion in Shariah-compliant bonds to help within the firm’s inexperienced transition.
This sample of markets shifting in the direction of inexperienced Sukuk, Al-Natoor stated, is one he expects to proceed.
“What we noticed in 2020 is a development that we count on to proceed: Issuers coming with Sukuk and prioritising being sustainable.”
Inexperienced financing, whether or not standard or Islamic, continues to be at an early stage of adoption globally, Al-Natoor defined, however inexperienced Sukuks signify a wise manner for issuers to draw extra buyers.
“As a result of issuers are attempting to widen their funding bases, now we have seen the combination of inexperienced and Islamic coming to the forefront. Whether or not in Saudi Arabia, the UAE, or multilateral organizations just like the Islamic Improvement Financial institution, we count on this development to proceed.”
Fitch Rankings launched their International Sukuk Outlook Dashboard earlier this month. Their report warned that some Sukuk issuers within the Center East had taken successful to their credit score scores as a result of pandemic’s financial situations and the drop in oil costs.
The report stated: “In 2021, we count on international sukuk provide to speed up, as issuers search to refinance maturing debt, fund massive price range wants, and as GCC funding restrictions ease following the normalisation of relations between Qatar and its neighbors.”