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A Silver Lining

As the world grapples to come to terms with what seems to be a protracted decline in the global banking and financial markets, the Islamic finance industry has shown impressive growth despite the odds. The Islamic bond market for instance, is said to have superseded the conventional bond market in terms of growth and performance. According to KFH Research, in the first half of this year alone the Sukuk market recorded US$66.4 billion in issuances and is fast closing in on the anticipated US$100 billion projected for 2012 by most industry analysts. The secondary Islamic market, according to KFH Research, recorded a year-on-year growth of 40.1% to US$210.8 billion, compared to 30.5% in 2011.

The GCC has been a key market for Sukuk issuances in particular this year, growing by 6.1%, and saw a year-on-year growth of 112.3% in the second quarter of 2012; although 39.5% lower than the previous quarter. According to industry players, the Sukuk market is expected to continue on this growth trend, but is also heavily reliant on external factors such as the developments in the Eurozone. According to analysts, the growth of Sukuk issuances this year can be attributed to a number of factors: including the declining yields for both corporate and sovereign issuances given significant demand, the rarity of high quality high yielding papers and the flight to fixed income safety amid further concerns emerging from Europe.

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