Standard & Poor’s today announced the release of Islamic Finance Outlook 2009, its latest annual compendium of topical research and commentaries on Islamic finance. The new yearbook includes Standard & Poor’s latest analysis and rating methodologies on almost 40 rated Islamic debt issues and issuers, and an overview of its suite of global benchmark and investable Sharia indices.
While total global sukuk issuance more than halved to US$14.9 billion in 2008 from US$34 billion in the previous year, Standard & Poor’s believes the outlook for Islamic finance remains strong. Sharia-compliant assets now total about US$700 billion after growth exceeding 10% annually during the past decade.
“The sukuk market suffered heavily in 2008 but we believe the outlook for asset-backed sukuk is positive, despite the doubts raised by the disruption in global financial markets and in structured finance,” said Mohamed Damak, credit analyst at Standard & Poor’s Ratings Services.
“When economies begin pulling out of the downturn, we expect Islamic finance to resume its rapid growth. The long-term pipeline for sukuk issuance is healthy, and the market is attracting interest from an increasing number of issuers in both Muslim and non-Muslim countries.”
Damak said Islamic financial institutions have remained somewhat insulated from the global financial downturn because Sharia law strictly prohibits them from handling interest-based instruments. The knock-on effects of the current economic slowdown, however, are pressuring Islamic financial institutions and creating new obstacles for their development.
“We see specific sources of risk stemming from the deepening economic slowdown in many countries, scarce liquidity, pronounced stock market declines, and plummeting real estate prices,” Damak added. “Standard & Poor’s has taken some negative rating actions on some Islamic banks over the past six months to reflect these adverse changes.”
Standard & Poor’s continues to widen its coverage of Islamic finance and issued several new ratings on sukuk transactions and takaful companies during 2008, including Tabreed 08 Financing Corp (National Central Colling Co) and the three tranches of a sukuk issued by Sun Finance (Sorouh Abu Dhabi Real Estate).
“Standard & Poor’s continues to foresee a bright future for Islamic finance and is committed to supporting its expansion by providing objective and independent opinions and benchmarks for Islamic issuers and investors,” said Jan Willem Plantagie, Middle East Regional Manager at Standard & Poor’s.
“Through our knowledge of Islamic finance and its key players, we consistently aim to share objective and accurate insights in this developing realm of global finance for the benefit of all investors.”
