Malaysia remains world's largest sovereign sukuk issuer - Moody's

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KUALA LUMPUR (Sep 4): Malaysia remains the world's largest sovereign sukuk or Islamic bond issuer accounting for almost 59% of total sovereign sukuk outstanding as of July 2014, according to a report by Moody’s Investors Service.

“The country’s sukuk market is already the largest in the world, and its enhancement towards the 'internationalization of Islamic finance' is a key pillar of the government’s Financial Sector Blueprint that was released in 2011,” said Khalid F. Howladar, global head of Islamic finance at Moody’s

Howladar expects Malaysia to continue dominating sovereign sukuk issuance although the United Arab Emirates (UAE) and Qatar will lead in terms of international volume.

“Sovereign volumes will remain concentrated in regions that have a natural cultural affinity with the sector, where estimates of the size of Islamic banking asset range from 10% of total banking assets in the UAE to 50% in Saudi Arabia,” Howladar said.

In Malaysia, Howladar notes that under the economic transformation programme (ETP), the country aimes to attract USD444 billion (RM1.41 trillion) in investments from 2010-2020.

“The Malaysian government and related issuers, as well as private sector corporates are seeking to raise the necessary funding to execute the government’s investment blueprint, aimed at attracting $444 billion in investments from 2010-2020 under the country’s economic transformation programme (ETP),” he said.

He says Malaysia has been adopted as a potential benchmark for sovereign sukuk penetration for countries that are pursuing an Islamic finance agenda.

“Taking Malaysia as a potential benchmark for sovereign sukuk penetration, we can see that other Muslim countries which are actively pursuing an Islamic finance agenda may over time increase the sukuk share of their debt to refinance around 35%-40% of their debt into Shari’ah compliant financings,” said Howladar.