Introduction
The market for sukuk, or Islamic bonds, is witnessing significant transformation as we approach 2026. With the global sukuk market size expected to surpass $600 billion by 2025, various factors—including increasing demand for Sharia-compliant investments and a growing number of issuances—are influencing trends. In 2022 alone, the sukuk market recorded a total issuance of approximately $115 billion, with a notable increase in the number of green sukuk, reflecting a shift toward sustainable finance. This report outlines the various elements influencing bond step-up downgrades and coupon increases in the sukuk market leading into 2026.
Top 20 Bond Step Up Downgrade Sukuk Islamic Coupon Increase 2026
1. Malaysia
Malaysia is consistently the largest issuer of sukuk, accounting for approximately 60% of the global market share. In 2023, the country issued over $30 billion in sukuk, driven by strong infrastructure projects and government initiatives.
2. Saudi Arabia
In 2022, Saudi Arabia’s sukuk issuance reached $20 billion, reflecting its Vision 2030 strategy to diversify the economy. The state-owned Saudi National Bank has played a pivotal role in these issuances, particularly in green sukuk.
3. United Arab Emirates
The UAE’s sukuk market has been robust, with a total issuance of $14 billion in 2022. Dubai’s government bonds have increasingly incorporated step-up mechanisms, attracting foreign investments.
4. Indonesia
Indonesia’s sukuk market has grown significantly, with a total issuance of $11 billion in 2022. The government uses sukuk to finance infrastructure projects, contributing to the nation’s economic growth.
5. Turkey
In 2022, Turkey’s sukuk issuance was approximately $6 billion, with significant participation from private companies. The Turkish government continues to promote sukuk as a funding source for public projects.
6. Pakistan
Pakistan issued around $3.5 billion in sukuk in 2022, primarily to fund infrastructure development. The government’s plan to increase sukuk issuance in 2023 aims to enhance liquidity in the market.
7. Bahrain
Bahrain’s sukuk market has seen consistent growth, with a total issuance of around $2 billion in 2022. The central bank’s initiatives to issue green sukuk are expected to attract ESG-focused investors.
8. Qatar
Qatar’s sukuk issuance totaled $5 billion in 2022, with a focus on funding the 2022 FIFA World Cup infrastructure. The Qatari government is expected to increase its sukuk issuance in 2023 to support post-event development.
9. Oman
Oman issued $1 billion in sukuk in 2022, primarily to finance government spending. The country’s efforts to diversify its funding sources have led to increased interest in sukuk.
10. Egypt
Egypt’s sukuk market is emerging, with an estimated issuance of $1 billion in 2022. The country’s plans to issue its first green sukuk in 2023 highlight the growing interest in sustainable finance.
11. Nigeria
Nigeria’s sukuk issuance reached approximately $2 billion in 2022, focusing on infrastructure projects. The Nigerian government is looking to increase sukuk as a means of financing development.
12. Morocco
Morocco’s sukuk market is nascent but growing, with a potential issuance of $500 million projected for 2023. The government aims to attract more foreign investments through sukuk.
13. Jordan
Jordan issued $400 million in sukuk in 2022, primarily to fund budget deficits. The government is exploring sukuk as a strategic tool for enhancing its financial stability.
14. South Africa
South Africa’s sukuk market is developing, with an estimated issuance of $250 million in 2022. The country’s Islamic finance sector is expected to grow as regulatory frameworks improve.
15. Bangladesh
Bangladesh issued around $500 million in sukuk in 2022, with plans to increase this in 2023. The government is keen to utilize sukuk for financing renewable energy projects.
16. Brunei
Brunei’s sukuk market remains small but stable, with a total issuance of $200 million in 2022. The government is considering introducing more sukuk products to attract local investors.
17. Kuwait
Kuwait’s sukuk issuance reached approximately $1 billion in 2022, focusing on funding public infrastructure. The country is expected to diversify its sukuk offerings in the coming years.
18. Lebanon
Lebanon’s sukuk market is currently limited, but discussions are ongoing to issue new sukuk worth $100 million to finance reconstruction efforts post-crisis.
19. Kazakhstan
Kazakhstan issued $150 million in sukuk in 2022, focused on social projects. The government is exploring sukuk as a viable option for financing future development.
20. Uzbekistan
Uzbekistan’s sukuk initiatives are still in their infancy, with potential issuances around $100 million projected for 2023. The government is actively working to develop a robust Islamic finance framework.
Insights
The sukuk market is poised for continued growth as global interest in Islamic finance increases. With a forecasted market size exceeding $600 billion by 2025 and a focus on sustainability, green sukuk are expected to dominate future issuances. In 2022, the green sukuk market saw a 50% increase in issuance compared to the previous year, indicating a clear trend toward environmentally sustainable investment options. Furthermore, as countries like Malaysia, Saudi Arabia, and the UAE continue to lead in sukuk issuance, the integration of step-up mechanisms and adjustments in coupon structures will likely become standard practice to attract diverse investors. As we approach 2026, these trends will be critical for stakeholders aiming to navigate the evolving landscape of Islamic finance.
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