A turbulent year winds to close with hope on the horizon

2017 is drawing to a close, the frenetic activity of the fourth quarter is winding down and the holiday season is upon us once again. This year has been marked by major events and signposted by scandal, but despite the ongoing pressures we have witnessed an industry both resilient and robust, contributing to positive performance across multiple asset classes. The strength and sophistication of the global Islamic finance markets is displayed to impressive effect in the 2017 edition of our industry-renowned Annual Guide, which this year features a comprehensive overview of the industry from its most respected experts and experienced practitioners.

The past year has had its ups and downs, with oil prices staging a slight recovery and interest rates remaining slow, sustaining confidence in emerging markets and supporting investor activity across the Middle East and Asia. The rising budget deficits of oil-producing nations sparked a sovereign surge that turned 2017 into an exceptional year for Sukuk volumes – with the market once again approaching the US$100 billion mark boosted by massive state issuances.

One of the biggest stories in the Sukuk sector was the entry of Saudi Arabia with its giant US$9 billion debut Sukuk in the first quarter, followed by regular and substantial local currency issuances that sparked significant over-subscription and a surge of investor interest towards the Kingdom.

But other sovereigns too have tapped the market, with giant issuances from Oman, Indonesia and Pakistan as well as a third Sukuk from Hong Kong and new entrants from across Africa sparking renewed hope for the continent as it continues on its Islamic finance journey.

The Dana Gas controversy offered a challenge to the industry, and one which continues to rumble as of writing. The question of Shariah compliance is integral to the Islamic debt capital market and the issue went to the heart of investor fears around the stability and security of Islamic structures. However, the decision of the UK courts to uphold the duty of the issuer to the Sukukholders has done much to reassure the market, and the question has contributed to renewed calls for standardization that are echoing ever more loudly around the world.

The GCC sanctions against Qatar were another surprise this year, providing practical challenges and raising geopolitical concerns across the Gulf. However, the country appears to have adapted to a new normal with growth and investment figures stabilizing, and we can but hope that the new year brings reconciliation to the region.

In Asia, Islamic finance continues to develop apace and Malaysia remains at the forefront of innovation. One of the biggest steps forward this year has been the successful issuance of multiple green Sukuk in the country, setting a worldwide example and achieving a new ASEAN-wide framework that could kickstart a ew revolution in socially responsible Sukuk.

Fintech is another area that is taking off in a big way – with advances across the world. Malaysia, Singapore, the UK, Dubai, Abu Dhabi, Bahrain… all of these locations have launched incubators and accelerators to encourage and expand fintech, while IFN itself launched the pioneering new Islamic Fintech Landscape to size the industry. Watch this space for more developments in the new year.

As we move forward into 2018 the future is both uncertain and optimistic, exciting and intimidating. No one can know what the future will bring, but as the performance of the Islamic markets over past 12 months has shown, Shariah compliant finance is flexible, innovative and strong – giving it the capacity to handle whatever the future may bring as long as we remain true to the moral and ethical principles that underpin the industry.

IFN is delighted to once again offer a multitude of material designed to inform, educate and inspire our readers across the world.

Lauren McAughtry
Group Managing Editor