Islamic syndicated financing to maintain momentum on post-war market sentiments: Fitch

RIYADH: Islamic syndicated financing is expected to maintain strong growth momentum this year, driven by issuers’ preference to largely avoid public US dollar sukuk and bond markets amid geopolitical tensions linked to the Iran war, according to Fitch Ratings.

In its latest report, the agency said that Islamic syndicated issuances in core markets, including countries in the Gulf Cooperation Council region, reached $23 billion in the first three months of this year, marking a 294 percent year-on-year rise, exceeding dollar sukuk issuances, which totaled $20 billion during the same period.

Islamic syndicated financing is a type of arrangement that complies with Islamic law and involves multiple lenders providing funds to a borrower. Financial institutions and banks use these arrangements to pool resources and share risk while adhering to Shariah finance principles.

“Over the longer term, Islamic syndications will be shaped by post-war market sentiment, access, and funding requirements. Syndications continue to be a viable and core funding channel, even during periods of market stress,” said Bashar Al-Natoor, global head of Islamic Finance at Fitch Ratings.

About 65 percent of Fitch-rated Islamic banks and multilaterals globally are investment-grade, while GCC Islamic banks in particular maintained significant domestic market share, ample liquidity and capital buffers going into the conflict.

In a separate report released in February, Fitch Ratings said that Islamic syndicated financing is set to remain a key funding source in 2026 among countries, including Saudi Arabia and the UAE, due to its lower complexity compared to sukuks and bonds.

The analysis further said that conventional syndicated financing slowed during the period, as it dropped by about 27 percent year on year and 50 percent quarter on quarter to $32 billion.

“Islamic syndications can mobilize large-scale funding for sectors such as infrastructure, energy, utilities, financial institutions and sovereigns. Many entities structure syndications with Islamic and conventional tranches, diversifying funding sources and attracting Islamic banks and multilateral institutions,” added the report.

In February, Fitch revealed that global Islamic syndicated financing expanded by around 16 percent year on year in 2025 to about $215 billion in outstanding.