The ESG sukuk market is growing fast. In 2024, issuance of ESG sukuk grew by 14% year-on-year, to $15.2 billion. Over that period, it represented 1.8% of total ESG bond issuance, and 6.1% of total sukuk issuance.

ESG debt, however, now makes up almost 7.5% of total debt finance raised. This represents an opportunity for sustainable sukuk. 

Across the globe, Muslim communities find themselves disproportionately affected by climate change, with extreme weather events, rising food insecurity, and other climate impacts taking a toll on their livelihoods, cultural practices, and spiritual life. 

In the last few years, devastating floods swept through Pakistan, affecting millions, displacing thousands, and leaving entire communities struggling to rebuild. In Indonesia, one of the world’s most populous Muslim-majority countries, rising sea levels threaten to submerge coastal villages and erode vital agricultural lands. Meanwhile, in parts of the Middle East and North Africa, persistent droughts and water scarcity are increasing pressures on already fragile ecosystems and economies.

Issuance activity in the Islamic bonds market has inched up recently, driven by the US Federal Reserve’s latest policy shift, according to a new analysis.

At the end of the third quarter of the year, global sukuk stood at $900 billion, posting an 8.5% growth compared to a year earlier, Fitch said.

The Fed cut its benchmark interest rate for the first time in four years by 0.50 percentage points. The move has had a positive impact on financing conditions, the ratings agency said.

Islamic finance, once mostly found in Muslim-majority countries, is now spreading its wings across the globe. Experts predict that by 2025, Islamic finance assets will reach nearly $5 trillion. This growth, clocking in at an impressive 10-12% annually over the past decade, is no small feat. It spans various sectors, including banking, capital markets, money markets, and insurance (takaful). But what’s really interesting is that non-Muslim-majority countries like the UK, South Africa, and even Luxembourg are jumping on board, drawn by the ethical principles and Sharia-compliant financial products Islamic finance offers.

The financial world is swiftly changing, propelled by technological advancements and regulatory updates. From tokenised assets, to campaigns for financial literacy, what are some of the key developments in the sector?
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The financial sector is witnessing a rapid advancements and a surge in asset growth, propelled by a combination of technological innovation, regulatory changes, and shifting market dynamics. Central to this transformation is the adoption of digital assets and the exploration of new financial instruments, which are redefining the boundaries of traditional banking and investment strategies. Below, we’ll explore some of the new actors at play.

In light of the rise in ethical consumption, new research from leading SaaS cloud banking platform, Mambu, reveals that just over a quarter (26%) of Gen Z Muslims solely use Islamic banking, though 85% of them are interested in banking with a financial institution that offers Shariah-compliant products, an increase from 2021. 
​The findings show that 31% of Gen Z Muslims are already using a mix of traditional and Islamic banking. Making it clear that banks already have the capability to cater to the demand for Islamic banking products.

To meet sharia rules, Islamic financial institutions are increasingly looking to the energy transition and socially responsible investing, boosting decarbonisation efforts and bringing new business opportunities in the Muslim-majority world.

Islamic banks in many countries continue to face a limited range of Islamic liquidity management instruments (ILMI) compared with conventional banks despite recent initiatives in a number of markets, Fitch Rating says. ILMI can provide Islamic banks more funding options and can help them invest their excess liquidity. Gaps in ILMI are more prominent in countries where Islamic banking is still-developing and niche.