Global Sukuk Market Update

The global Sukuk market is expected to face several challenges this year, notably the imposition of the US tariffs. However, despite these headwinds, the market remains poised for growth, driven by persistent funding needs, strong investor demand, and the ongoing expansion of Sharia-compliant reforms. Emerging markets will continue to lead this growth, largely due to the stable credit profiles of Sukuk issuers and a significant proportion of investment-grade ratings.

Recent developments in the Sukuk market further highlight the resilience of this sector. Several key events this month have underscored the dynamic nature of Sukuk issuance and its growing importance in global finance.

For instance, Solidcore Resources, headquartered in Kazakhstan and majority-owned by Oman’s sovereign wealth fund Mercury Investments, is planning to raise up to $350 million through conventional bonds and Sukuk issuances in Gulf markets. This capital will support the development of the Syrymbet tin and Tokhtar gold projects in Kazakhstan. The company’s efforts to diversify funding sources, especially following its exit from Russia, demonstrate the increasing importance of Sukuk in emerging markets. This move also highlights the role of Gulf markets in facilitating capital-raising initiatives in Central Asia.

In Pakistan, the Mughal Iron and Steel Industries Limited has announced that it will disburse the principal and profit payments on its Sukuk Certificates-IV by April 21, 2025. This announcement is significant as it reflects the continued use of Sukuk in Pakistan’s corporate sector, providing a reliable mechanism for financing in a country with a complex tax and regulatory landscape. Moreover, At-Tahur Limited, a dairy producer in Pakistan, is planning to raise up to Rs750 million (~$2.6 million) through Sukuk to support working capital needs, further demonstrating the market’s robustness. This trend is reflective of Pakistan’s broader drive to leverage Islamic finance instruments to meet capital requirements and reduce dependency on conventional financing.

On a larger scale, Pakistan Lucky Investments Limited, a subsidiary of YB Pakistan Limited, has launched the largest-ever mutual fund IPO in the country’s history, raising PKR 50 billion (~$180 million) through its Lucky Islamic Money Market Fund. The success of this offering underlines a growing investor appetite for Sharia-compliant products. This demand also aligns with the Federal Shariah Court’s directive to phase out interest-based financial systems by 2027, signalling a long-term shift in the country’s financial ecosystem. This increasing appetite for Islamic finance products demonstrates both a strategic shift in local financial markets and the growing influence of Islamic finance across the region.

Meanwhile, Egypt is set to issue $2 billion in Sukuk this year as part of a broader strategy to diversify its funding sources amid ongoing foreign currency challenges. The move will also strengthen Egypt’s position in the global Islamic finance markets. With a growing reliance on Sukuk, Egypt is positioning itself as an emerging hub for Sharia-compliant financing in the North African region. The country’s effort to tap into Sukuk markets is indicative of the wider regional trend where countries with economic challenges are turning to alternative financing mechanisms to bolster their financial infrastructure.

The growing accessibility of Sukuk investments is also a critical development in the market. Abu Dhabi Islamic Bank (ADIB) has unveiled Smart Sukuk, a groundbreaking digital platform that allows retail investors to purchase fractional Sukuk directly through the ADIB Mobile App. This move dramatically reduces the entry point for Sukuk investments—from a traditional minimum of $200,000 to just $1,000—making Sharia-compliant fixed-income investing accessible to retail investors for the first time. ADIB’s initiative not only positions the bank as a leader in Islamic fintech but also sets a precedent for future innovations in the sector.

Another noteworthy development is Warba Bank’s approval by the Kuwait Capital Markets Authority (CMA) to issue up to $250 million in Perpetual Tier I Capital Sukuk. This approval is crucial, as it demonstrates the growing sophistication of the Gulf’s Sukuk markets, where large-scale issuances are becoming more common. Warba Bank’s issuance will likely have a significant impact on the financial landscape in the region, providing a model for other banks to pursue similar offerings.

The issuance of Sukuk has also gained traction in smaller markets. Vidullanka Plc, a leading renewable energy company in Sri Lanka, is set to issue the nation’s first publicly listed Sukuk bond in the coming weeks. This pioneering move follows the Colombo Stock Exchange’s efforts to develop Sri Lanka’s Islamic finance market. By raising 500 million Sri Lankan rupees (~$1.7 million) through the Sukuk, Vidullanka aims to refinance short-term debt and support its clean energy expansion strategy. The company’s ability to secure favourable preliminary ratings from Fitch Ratings further boosts confidence in Sri Lanka’s emerging Sukuk market.

The Central Bank of The Gambia has also experienced strong demand for its Sukuk instruments, with its April 9, 2025 government securities auction attracting interest across all tenors. The auction saw the issuance of Sukuk-Al-Salaam bills, with strong oversubscription, reflecting the growing role of Islamic finance in Gambia’s public debt management strategy. This is part of a broader trend across sub-Saharan Africa, where Sukuk is playing an increasingly pivotal role in public finance.

On the institutional front, the International Islamic Liquidity Management Corporation (IILM) successfully reissued $1.02 billion in short-term Sukuk in April 2025, underscoring continued global investor confidence in the asset class. The IILM’s re-issuance, with a bid-to-cover ratio of 216%, demonstrates strong demand for short-term, Sharia-compliant liquidity instruments amid a volatile global market. With year-to-date issuance totals reaching $6.07 billion, IILM’s success reflects the solid position of Sukuk in global capital markets.

Looking ahead, the Pakistan Stock Exchange (PSX) has updated its auction schedule for the Government of Pakistan (GoP) Ijarah Sukuk (GIS) for the period from April to June 2025. This is indicative of the continuing demand for sovereign Sukuk and the government’s strategic approach to managing public debt. The targeted auction size of PKR 310 billion (~$1.1 billion) also reflects the growing importance of Sukuk as a tool for financing infrastructure and other government initiatives.

Finally, Bangladesh is preparing to issue its sixth Sukuk bond in May 2025, aiming to raise Tk 20 billion (~$165 million) to fund a key infrastructure project in the Rajshahi division. This issuance will be structured using both Istisna’a and Ijarah principles, reflecting Bangladesh’s ongoing efforts to diversify its financial instruments in line with Shariah principles.