The global Islamic finance industry is expected to register growth in 2025 despite headwinds and “growing uncertainty,” S&P Global said in its recent Islamic Finance Outlook report (pdf). This year’s anticipated positive performance will come after the industry grew 10.6% in 2024, driven by an outstanding sukuk performance and substantial banking asset growth. Banking assets contributed to 60% of the industry’s growth in 2024, with Saudi Arabia leading the pack, accounting for around two-thirds of that acceleration.

Global sukuk issuance is on track to hit as much as USD 200 bn by the close of the year — barring any major impact from current market volatility, S&P said, reiterating its forecast from January of this year. Foreign currency-denominated sukuk are expected to account for a little less than half of the total (USD 70-80 bn), maintaining positive momentum from 2024, when FCY-denominated sukuk rose 29% y-o-y despite total sukuk issuances dipping.

The year so far: Global sukuk issuance hit a record in 3Q 2025, defying market volatility and the usual seasonal slump, according to recent Fitch Ratings figures. Core markets — the GCC, Malaysia, Indonesia, Turkey, and Pakistan — issued about USD 80 bn in the quarter, up 22% q-o-q and 89% y-o-y. The 3Q performance comes after issuances fell 15% y-o-y in 1H 2025 on the back of lower local currency-denominated issuances in key markets, including Malaysia, Qatar, the UAE, and Saudi Arabia.

Sustainable sukuk issuance volumes rose by 27% in 1H 2025, reaching USD 9.3 bn, according to S&P. The issuance activity was led by the Islamic Development Bank, which accounted for almost half of the market’s activity, with Saudi Arabian issuers leading the market.

Saudi Arabia and the UAE are expected to be the primary engines of growth, S&P said. “Saudi Arabia’s Vision 2030 will continue to translate into significant banking system growth, provided it attracts sufficient refinancing sources, including sukuk issuances from the international capital market.” Meanwhile, high non-oil GDP growth in the UAE and high capex needs “will further support financing requirements and sukuk issuances in 2025,” according to the report. S&P also sees continued growth in the industry across the rest of the GCC, as well as high single-digit growth coming out of Asia-Pacific markets — particularly Indonesia, Bangladesh, Malaysia, and Pakistan.

Not all markets will do equally well: Local currency-denominated sukuk are expected to continue growing in Turkey and Egypt, but overall performance will depend on the performance of their currencies. S&P said. Depreciation in Turkey made it one of the largest contributors to growth in relative terms, but the contribution was modest in absolute terms, the report said.

Risks remain: Prospects for the sukuk and takaful market in 2026 and next depend on the possibility of adopting Shariah Standard 62, S&P noted, saying that the adoption of the new standards could disrupt the market “by potentially reclassifying the instruments from debt-like to equity-like.” Some issuers may still preemptively rush to market before the standard is implemented, particularly if it is adopted in its current form.

SOUND SMART- Shariah Standard 62 is a proposed overhaul of how sukuk are treated to bring them more in line with shariah principles. The planned revisions — introduced in 2024 — would allow sukuk holders to gain full ownership of the underlying assets and expose them to additional risks like defaults. It could also increase costs and red tape for issuers through additional asset transfer and documentation.

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