KHALEEJ TIMES, Tuesday, May 4, 2021 | Ramadan 22, 1442
10 UAE national banks post Dh7.74 billion net profit in Q1
Emirates:
The global Islamic finance industry is expected to grow 10-12 per cent
during the 2021-22 due to increased sukuk issuance and a modest economic
recovery in the main Islamic finance markets, says a latest report.
S&P Global Ratings said the $2.2 trillion industry continued to grow at a slower
pace last year despite the Covid-19 pandemic. Global Islamic assets expanded by
10.6 per cent last year against growth of 17.3 per cent in 2019 as the pandemic
disrupted the rising trend due to slowdown in global economy.
“Islamic finance grew rapidly in 2020, albeit at a slower pace than in 2019,
despite the double shock from the pandemic and the drop in the oil price,” said
Mohamed Damak, head of Islamic Finance at S&P Global Ratings.
Islamic finance, which bans interest payments and pure monetary speculation, has
been on the rise for many years across markets in Africa, the Middle East and
Southeast Asia, but it remains a fragmented industry with uneven implementation
of its rules.
“Although we expect a modest recovery for most core Islamic finance countries in
2021-22, we think that the sector will expand against the backdrop of continued
standardisation and integration,” Damak said.
Saudi, Qatar support
The industry is expected to receive some support in the coming two years in
Saudi Arabia, where mortgages and corporate lending are expected to rise as the
country pushes ahead with plans to diversify the economy. Investments in Qatar
for the 2022 soccer World Cup and the Expo event in Dubai later this year are
also expected to support growth.
“Over the next 12 months, we could see progress on a unified global legal and
regulatory framework for Islamic finance that the Dubai Islamic Economy
Development Center and its partners are developing. Depending on the outcome and
its adoption, we believe that such a framework could help resolve the lack of
standardisation and harmonisation that the Islamic finance industry has faced
for decades,” Damal said.
Sukuk issuance up
The ratings agency forecast global issuance of Islamic bonds, or sukuk, to reach
$140-155 billion this year, up from roughly $140 billion in 2020, thanks to
abundant liquidity and sustained financing needs among corporates and
governments.
S&P also highlighted that the full impact of the coronavirus crisis has yet to
materialise and more requests for sukuk restructurings and maturity extensions,
as well as higher default rates, are expected this year.
“We see pressure on real estate developers, given the drop in real estate prices
in the GCC (Gulf Cooperation Council) and building risks in the commercial real
estate sector. Similarly, companies related to aviation, tourism, travel, and
hospitality — sectors that have been severely hit by Covid-19 — will take
several quarters to recover to prepandemic levels,” S&P said.
“We have excluded Iran from our statistics this year owing to the extreme
volatility of the country’s currency in the parallel market (as disclosed by the
Central Bank of Iran), which makes comparison with last year’s numbers or any
forecasts less meaningful,” the rating agency said.
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