The global sukuk market witnessed remarkable growth in the third quarter of 2025, with issuance volumes climbing 21% year-on-year to surpass $231 billion. This marks the most active third quarter ever recorded, underscoring the growing investor confidence and sustained demand for Islamic finance instruments worldwide.
Strong Credit Performance Drives Market Confidence
The overall credit quality of sukuk issuers remains robust. Approximately 88% of issuers maintain Stable Outlooks, while 6% are rated Negative, 3% Positive, and another 3% unrated.
Most outstanding sukuk fall under the ‘A’ rating category (40%), followed by ‘BBB’ (24%) and ‘BB’ (14%). Importantly, there have been no defaults or fallen angels reported so far in 2025, reflecting strong market fundamentals and disciplined credit management.
Nearly 97% of sukuk are senior unsecured instruments, though a small but growing portion comprises subordinated sukuk, particularly issued by banks to strengthen their regulatory capital and diversify funding sources.
Maturity Trends Indicate Stability
By the end of September 2025, there were 275 outstanding sukuk and 98 sukuk programmes in circulation. Medium-term issuances, ranging from three to ten years, accounted for 82% of the total, while long-term sukuk above ten years represented 11%. Only 7% had short-term maturities of less than three years.
Around one-third of rated sukuk are expected to mature by 2027, while the remaining 73% extend beyond 2028. This maturity spread provides stability and predictable returns, appealing to both institutional and sovereign investors.
Currency and Structure Preferences
The US dollar continues to dominate sukuk issuance, representing 92.7% of total volumes. The Malaysian ringgit (MYR) ranks second with 5.4%, while other currencies, including the euro, dirham, and rupiah, make up the rest.
Nearly all rated sukuk , about 98%, feature fixed rates and a bullet repayment structure, where the principal is repaid at maturity. This structure aligns with global investor preferences for clarity and stability in returns.
Regional Leadership and Issuer Distribution
The Middle East retains its leadership position in the global sukuk market, accounting for 70.6% of total issuance. Asia follows with 20.4%, while Europe contributes 7.8%, Africa 0.9%, and North America 0.3%.
By issuer type, sovereigns and supranationals dominate the market with 54% of total sukuk volumes. Financial institutions and corporates each contribute 16%, while public finance and infrastructure sectors account for 8% and 4%, respectively.
Among individual markets, Saudi Arabia leads with 33% of total rated sukuk, followed by the UAE (15%), Indonesia (11%), Malaysia (8%), and Türkiye (8%).
ESG Sukuk Gains Momentum
The demand for ESG-compliant sukuk continues to rise, now representing 12% of total rated volumes, or about $27 billion. This trend reflects a growing commitment among issuers and investors to sustainability-linked finance. Governments and quasi-sovereign entities in the GCC and Southeast Asia are particularly active in this segment.
Outlook for 2026 and Beyond
The sukuk market’s strong trajectory is expected to continue into 2026. Favorable pricing, investor diversification, and supportive regulatory frameworks are likely to sustain issuance growth. As Islamic finance gains broader international acceptance, sukuk are increasingly seen as a reliable and ethical alternative to conventional bonds.
The surge in global sukuk issuance underscores the market’s maturity and its expanding appeal among global investors seeking both financial returns and value-based investment opportunities.
