Global: Resilient growth for Islamic finance in 2025-2026 despite headwinds
Source: Middle East Insurance Review | May 2025
The Islamic finance industry experienced a rapid asset increase in 2024, mainly from growth in banking assets and sukuk owing to higher foreign currency-denominated issuances. S&P Global Ratings expects continued growth in 2025 barring any significant macroeconomic or intrinsic disruption, in a recent report, titled ‘Islamic Finance 2025-2026: Resilient Growth Amid Upcoming Headwinds’.
The report said that S&P has recently revised its oil price assumption to $65 per barrel for the remainder of 2025 and $70 per barrel from 2026. “This will likely continue to support some growth in most core Islamic economies. Simultaneously, financing needs driven by economic transformation programmes will remain high and the inherent preference for Islamic finance will persist. As a result, despite growing uncertainty, we expect the Islamic finance industry to grow in 2025.”
However, a further decline in oil prices could reduce the growth prospects for core Islamic finance economies and markets. In addition, adopting Shariah Standard 62 could disrupt the sukuk market from 2026 by potentially reclassifying the instruments from debt-like to equity-like. But the extent of this will depend on whether the standard is approved, its content and when it will be implemented. If Standard 62 is adopted as proposed, S&P anticipates the industry could become more fragmented and less attractive to investors and issuers due to higher sukuk pricing for issuers and fewer fixed-income investors. M