Introduction
The Islamic finance market has seen substantial growth over the past decade, with the Sukuk (Islamic bond) sector being a significant contributor. As of 2023, the global Sukuk market was valued at approximately $600 billion, reflecting a compound annual growth rate (CAGR) of 10% from 2020. The demand for Sukuk is driven by increasing investments in infrastructure and sustainable projects, particularly in the Middle East and Southeast Asia. However, concerns regarding defaults have risen, prompting discussions about the potential for defaults in the Sukuk market by 2026.
Top 20 Bond Credit Entity Sukuk Islamic Default 2026
1. Saudi Arabia
Saudi Arabia is the largest issuer of Sukuk globally, with over $36 billion in Sukuk issued in 2022. The Kingdom’s efforts to diversify its economy under Vision 2030 have led to increased demand for Islamic financial instruments.
2. Malaysia
Malaysia remains a key player in the Islamic finance sector, accounting for approximately 49% of the global Sukuk market. The country issued $28 billion in Sukuk in 2022, driven by extensive infrastructure projects and a robust regulatory environment.
3. Indonesia
Indonesia’s Sukuk market is one of the fastest-growing, with issuances reaching $13 billion in 2022. The government has launched various initiatives to finance public infrastructure through Sukuk, making it a pivotal player in the sector.
4. United Arab Emirates (UAE)
The UAE’s Sukuk issuances were valued at $16 billion in 2022, with Dubai leading the charge. The region’s strong economic recovery post-pandemic has spurred demand for Islamic financing to support infrastructure and tourism projects.
5. Turkey
Turkey’s Sukuk market has seen significant growth, with issuances reaching $8 billion in 2022. The government’s focus on sustainable finance and infrastructure development has positioned Turkey as an emerging market for Sukuk.
6. Qatar
Qatar issued approximately $12 billion in Sukuk in 2022, driven by its ambitious infrastructure projects in preparation for the FIFA World Cup. The nation has maintained a strong credit rating, which supports its Sukuk market.
7. Pakistan
With Sukuk issuances of around $5 billion in 2022, Pakistan’s market is expanding, largely due to government efforts to promote Islamic finance. However, economic challenges pose risks of defaults in the upcoming years.
8. Bahrain
Bahrain’s Sukuk market reached $4 billion in 2022. The country’s regulatory framework is well-established, allowing for steady growth, although market volatility raises concerns about potential defaults.
9. Egypt
Egypt issued $3 billion in Sukuk in 2022, focusing on financing its economic recovery post-COVID-19. The government’s commitment to developing the Islamic finance sector is critical for future growth.
10. Oman
Oman saw Sukuk issuances of about $2 billion in 2022, with the government exploring Islamic finance as a viable option for supporting its budgetary needs amidst fiscal challenges.
11. Nigeria
Nigeria’s Sukuk market is emerging, with issuances of $1.5 billion in 2022, primarily for infrastructure projects. The country’s potential for Islamic finance is significant, but challenges remain regarding regulatory frameworks.
12. Kuwait
Kuwait’s Sukuk issuances reached $1 billion in 2022, driven by government initiatives to support economic diversification. The outlook remains cautiously optimistic, with attention to potential default risks.
13. Jordan
Jordan issued approximately $500 million in Sukuk in 2022, with a focus on financing development projects. The country’s proactive stance in Islamic finance could bolster its market presence.
14. Morocco
Morocco’s Sukuk market is nascent, with issuances of around $300 million in 2022. The government is exploring Islamic finance as a tool for economic development, although the market is still in its early stages.
15. Bangladesh
Bangladesh’s Sukuk issuances were valued at $200 million in 2022. The government is working to enhance the regulatory framework, aiming to attract more investment through Islamic finance.
16. South Africa
South Africa’s Sukuk market is developing, with issuances of $150 million in 2022. The country’s commitment to Islamic finance is evident, but market penetration remains limited compared to other regions.
17. Senegal
Senegal issued $100 million in Sukuk in 2022, focusing on financing infrastructure. The government’s interest in Islamic finance is growing, presenting opportunities for future expansion.
18. Maldives
Maldives launched its first Sukuk worth $50 million in 2022, targeting tourism development projects. The small market size poses challenges, but interest in Islamic finance is on the rise.
19. Afghanistan
Afghanistan’s Sukuk landscape is challenging, with minimal issuances. Political instability and economic hardship raise concerns about potential defaults in any future Sukuk offerings.
20. Iraq
Iraq has not issued Sukuk yet, although discussions are underway. The potential for growth exists, but the country’s financial and political instability poses significant risks.
Insights
The Sukuk market is poised for significant developments ahead of 2026, amid increasing demand for sustainable and ethical financing options. The global Sukuk market is projected to grow to approximately $800 billion by 2026, driven by heightened interest from both investors and governments. However, the risks of defaults loom large, especially in emerging markets where economic and political uncertainties persist. For instance, countries like Pakistan and Nigeria face challenges that could impact their credit ratings and Sukuk performance. Stakeholders need to remain vigilant and adapt to market dynamics to mitigate default risks and capitalize on growth opportunities in the Islamic finance sector.
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