Moody’s: Saudi Arabia is the largest market for Islamic finance in...

Moody’s, the credit rating agency, said that Saudi Arabia will continue to switch to issuing more Sharia-compliant sukuk over the next 12-18 months.

Moody’s indicated in a recent report that companies are increasingly using Islamic products, even with low oil prices, the Coronavirus crisis, and the presence of many challenges facing economies.

Moody’s expected that Islamic finance in the Kingdom of Saudi Arabia will reach about 80% compared to 78% in 2019, compared to 70% in 2013, which will strengthen Saudi Arabia’s position as the largest Islamic financing market in the world.

Over the past three years, the Saudi government has developed from scratch a deeper domestic sukuk and bond market, and is increasingly operating well, allowing it to benefit from the growing domestic and international demand for Sharia-compliant fixed income assets, the agency said.

Moody’s said that the total assets of Islamic finance amounted to 339 billion dollars as of March 2020, surpassing Malaysia in second place by about 145 billion dollars.

She added that this, in turn, helped diversify its sources of financing compared to what was available during the oil price shock of 2015-2016 and eased liquidity pressures amid more than double government financing needs this year.

“A comprehensive set of Islamic finance regulations have spurred Saudi banks to issue Islamic sukuk and products now listed in the main market, and the Islamic mortgage refinancing business has been established,” said Ashraf Madani, Senior Vice President at Moody’s.

He continued: The industry will benefit more from the increase in the issuance of government sukuk, which may lead to an increase in foreign investment supported by more permissive and deeper entry rules into the capital markets.