Moody’s forecasts growth in African sukuk

The market for Islamic financial instruments is growing in 18 African countries, according to a recent report from rating agency Moody’s.

Despite $2.3 billion of African sukuk issuance since 2014, the continent still makes up just 0.5% of global sukuk issuance. Similarly, despite an increase in the number of Islamic banking licences in Africa, Moody’s estimates that Islamic banking assets make up less than 5% of total African banking assets.

“We expect both sukuk issuance and Islamic banking assets to continue to grow quickly in Africa from a low base,” stated the report.

The agency said growth in issuance will be driven by increased financing needs for infrastructure projects; investors’ growing comfort with the legal complexity of Islamic instruments; and the desire within Africa to forge closer links to other Islamic finance markets in the GCC and Asia.

The 18 identified countries with the most potential for Islamic finance growth include Egypt, Morocco, Algeria and Tunisia.

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