The global Sukuk market continues to expand as demand for Shariah-compliant financial instruments remains strong, supported by increasing financing needs in key Islamic finance markets and the rising adoption of sustainable Sukuk. As an ethical and innovative alternative to conventional bonds, Sukuk allows investors to earn returns without interest (Riba) or excessive uncertainty (Gharar), attracting both Muslim and non-Muslim investors. This market has established itself as a fundamental financing tool for infrastructure development, sovereign funding, and corporate investments.

Global demand for Sukuk continues to rise, driven by key markets across the Middle East, Southeast Asia, Africa, and Europe. In 2023, the market expanded from $904.5 billion and projected to reach $2,160.55 billion by 2028, backed by sustainable financing initiatives, government-driven economic transformations, and the rise of digital issuance and green Sukuk.

Global Sukuk issuance is expected to reach between $190 billion and $200 billion in 2025, following a total issuance of $193.4 billion in 2024. Although this marks a slight decline from $197.8 billion in 2023, foreign currency-denominated Sukuk saw a significant 29% increase, reaching $72.7 billion by the end of 2024. This growth was primarily driven by issuers in Saudi Arabia, Malaysia, and Indonesia, with foreign currency-denominated issuance expected to remain strong in 2025. Many issuers sought to capitalize on improving global liquidity conditions as central banks began easing monetary policies, while ongoing economic diversification programs in core Islamic finance countries fueled the need for additional funding.

Sustainable Sukuk has also become an important segment of the market, with total issuance reaching $11.9 billion in 2024, compared to $11.4 billion in 2023. While green Sukuk issuance saw a slight slowdown, sustainability-focused Sukuk, particularly those with social and environmental benefits, remained the dominant category. Saudi Arabia led the issuance of sustainable Sukuk, accounting for 38% of total issuance, followed by Indonesia and the UAE. The issuance volume for 2025 is expected to range between $10 billion and $12 billion, depending on the pace of regulatory action and the commitment of core Islamic finance countries to implementing net-zero policies.

On the other hand, local currency-denominated Sukuk issuance declined by 14.6% in 2024, with noticeable drops in Malaysia, Pakistan, Turkiye, and Indonesia. Malaysia saw the largest decrease, as government issuance was reduced due to a smaller fiscal deficit and tighter liquidity conditions within the Islamic banking sector. In contrast, Saudi Arabia's local currency Sukuk market showed resilience, with jumbo issuances and the introduction of retail Sukuk contributing to increased activity.

Despite its strong performance, the Sukuk market faces potential regulatory challenges that could reshape its structure. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is currently reviewing Shariah Standard 62, which, if implemented, may require a shift from traditional contractual obligations of Sukuk sponsors to structures where underlying assets play a more central role. This could introduce new legal complexities, increase costs, and expose investors to additional risks. While the adoption of this standard is unlikely before 2026, industry participants are closely monitoring developments to assess its impact on future Sukuk issuances.

Highlighting the transformative potential of the sector, Mr. Zubair Mughal, CEO of AlHuda Centre of Islamic Banking and Economics (CIBE), noted, "The Sukuk market is poised to shape the future of ethical finance, offering robust, Shariah-compliant solutions for global infrastructure and development needs. Sukuk role in development financial inclusion and sustainable economic growth aligns perfectly with the core values of Islamic finance.”, he also mentioned that Sukuk consist around 25% of Global Islamic Finance Assets.

AlHuda CIBE is actively contributing to the growth of the Sukuk sector, providing end-to-end consultancy and Shariah advisory services to financial institutions worldwide. These services cover structuring and digital transformation, helping issuers meet market demands while enhancing transparency and compliance. As the Sukuk market enters a new era of innovation and regulatory refinement, it is positioned to play a pivotal role in global finance, offering investors a unique and socially responsible avenue for growth.