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HomeFinanceSaudi Sukuk and Debt Market Flourishes with Robust Growth

Saudi Sukuk and Debt Market Flourishes with Robust Growth

Saudi Capital Market Authority Reports Impressive Expansion

June 6, 2024
in Finance
Reading Time: 2 mins read
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The Saudi Arabian sukuk and debt capital market has seen a substantial increase in size since 2019, now exceeding SR30 billion ($7.9 billion), as per the Capital Market Authority of the Kingdom.

The market’s annual growth rate has been recorded at 7.9 percent, with an even higher rate of 9.6 percent for unlisted issuances.

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From SR72 billion in 2019, the unlisted sukuk and debt capital sector expanded to approximately SR105 billion by the end of 2023. Concurrently, the overall market for corporate sukuk and debt instruments reached a total of SR125 billion by the close of 2023, a rise from the SR95 billion figure at the end of 2019.

The authority disclosed that the number of entities issuing debt instruments has seen a threefold increase by the end of 2023 compared to the figures from the end of 2019.

In the last three months of 2023, the value of sukuk and bond issues in the Kingdom saw a 2.8 percent year-over-year increase, totaling around SR758.8 billion. This surge was largely due to the government’s listed sukuk and bonds, which made up 70 percent of the total at SR529.8 billion.

Sukuk, which are Islamic financial certificates compliant with Shariah law, allow investors to hold a stake in the issuer’s assets until the investment matures.

The advancements in the market can be attributed to the dedicated efforts of the authority’s Sukuk and Debt Instruments Market Development Committee, overseen by the CMA’s chairman. This committee has introduced several initiatives aimed at boosting liquidity and diversifying the investor base.

Market activity has also seen a significant upturn, with the value of trades hitting SR2.5 billion in 2023, a substantial increase from SR0.8 billion in 2019. The number of executed transactions skyrocketed from 3,722 in 2021 to 36,961 in 2023.

The Deputy Assistant of Financing and Investment at CMA, Fahad Mohammed bin Hamdan, reaffirmed the authority’s dedication to nurturing a robust sukuk and debt capital market. He highlighted the noticeable rise in individual investor participation, which escalated from roughly 1 percent at the end of 2021 to about 12.5 percent by the end of 2023.

This uptick was driven by a particularly successful public offering of sukuk in late 2022, which drew over 125,000 private investors. Bin Hamdan noted that the banking sector’s share decreased from 60 percent at the end of 2021 to 48 percent by the end of 2023, while government entities’ share fell by 7 percent over the same period. Meanwhile, the proportion held by investment funds increased from around 12 percent to 15 percent.

The financial sector stood out as the most prominent issuer of sukuk and debt instruments by the end of 2023, followed by the energy and public utilities sectors.

Looking to the future, the CMA has charted out 16 strategic initiatives to further develop the market. These include improving legislative conditions, rolling out sustainable bonds, eliminating withholding tax for local debt issuances, and broadening the REPO framework to encompass debt market instruments.

Bin Hamdan stressed that these measures aim to enhance the market’s regional and international competitiveness and contribute to Saudi Arabia’s economic growth and diversification objectives.

The Kingdom is keen on progressing its capital market by promoting private sector engagement and drawing foreign institutional investors to support its pivotal projects.

Tags: CMA InitiativesDebt Capitalmarket growthsaudi arabiaSukuk Market
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