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In its latest report on the African sukuk market, the credit rating agency said outstanding African sukuk crossed USD 7 billion in August, up 16% year-on-year.

Fitch said that sukuk is becoming a new way for some African governments to get funding, helping them to move away from traditional loans and attract interest from banks and investment funds in the GCC and Africa.

Egypt accounts for 48% of Africa’s outstanding sukuk, making it by far the continent’s largest market, supported by regulatory reforms and closer economic ties with the GCC. Around USD 1 billion of African sukuk has been issued so far in 2026, mainly by Benin and Egypt, a sharp slowdown compared with the USD 3.3 billion issued across the full year in 2025.

The decline in fresh issuance this year underscores how heavily the market still depends on a narrow group of sovereigns that are both willing and able to access the instrument. Fitch noted that enabling regulation for sukuk remains absent in most African countries, leaving a legal and structural vacuum that discourages new entrants.

Domestic Islamic financial institutions, which typically serve as both key investors and potential issuers in more established sukuk markets, are either small or non-existent across much of the continent.

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The post Sukuk liquidity edges closer to pre-Iran war levels but recovery fragmented, says Fitch appeared first on International Finance.

Uzbekistan’s high yields and strong fundamentals make the landlocked Central Asian nation a preferred credit for many emerging market investors.

In June this year, Moody’s upgraded Uzbekistan a notch from Ba3 to Ba2 with a stable outlook due to “sustained improvements” in the country’s institutional and policy framework.

“These developments indicate increasing policy effectiveness and have enhanced the country’s resilience to external shocks,” said Moody’s back then.

The sovereign witnessed another positive rating action in June when Fitch and S&P upgraded their outlooks from stable to positive while maintaining their BB ratings.

Simultaneously, the government, on August 12, held a press conference on a new draft law named “On the Capital Market.” The bill provides for expanding the range of financial instruments, developing market infrastructure, and improving state regulation.

The event was attended by Saibjan Khudaiberdiyev, Head of the Capital Market Development Department; Saulat Toreshov, Head of the Capital Market Regulation Department; and Valeriy Lee, Head of the Capital Market Ecosystem Development and Regulatory Innovation Division.

The objectives of the new draft law include attracting global depositories to the Central Asian nation’s national stock market, apart from adopting a new regulation in cooperation with international financial institutions.

According to the government data, the volume of share issuances in Uzbekistan increased from 189.7 trillion soums in 2023 to 265.1 trillion soums in 2025, reaching 269.4 trillion soums by July 1, 2026. Over the same period, the volume of corporate bond issuances grew from 1.06 trillion to 3.93 trillion soums, exceeding 7 trillion soums.

Total trading volume on the stock exchange increased nearly sixfold from 2023 to 2025, rising from 2.9 trillion to 17.6 trillion soums.

The draft of the new law consists of 16 chapters and 123 articles. During its preparation, current legislation was reviewed, taking into account modern market requirements and international practice. The EBRD, IFC, ADB, Islamic Development Bank, UNDP, IOSCO, US Department of Commerce, and SEC participated in the development, alongside state bodies, professional market participants, and representatives of market infrastructure.

The bill, expanding the list of financial instruments, provides for the introduction of options, swaps, futures, forwards, and contracts for difference. It also proposes to regulate covered bonds, securitized bonds, sustainable development bonds, and sukuk securities.

Sukuk gets special attention in the draft law, reflecting Uzbekistan’s Islamic finance push.

The bill provides for legal regulation of the issuance and circulation of sukuk, including partnership, ijara, trade, and agency types. To protect investors’ rights, the draft law has also proposed the introduction of the institution of a representative of sukuk holders and a special mechanism to confirm the compliance of transactions with Islamic finance standards.

The bill also aims to enhance capital market infrastructure by proposing the licensing of custodial activities and central counterparty operations. Additionally, it seeks to expand the powers of the Central Securities Depository and introduce self-regulatory organizations along with a representative for bondholders.

Meanwhile, Uzbekistan’s soum-denominated international bonds are set to be added to JP Morgan’s Government Bond Index (GBI-EM) for local currencies.

The inclusion will be effective from September 30, 2026. It will be the only CIS country that has its local currency sovereign bonds included in the index.

Uzbekistan is a regular issuer of local currency Eurobonds. Earlier in 2026, the sovereign printed S12.194 trillion (USD 1 billion equivalent) through a three-year 144A/Reg S bond offering. That deal was not only the biggest single-tranche issuance by Uzbekistan in the Eurobond market. It was also the largest local currency transaction across CEEMEA in the past 15 years.

There was strong demand for the deal, given the high yield and strong performance of the Uzbekistani soum versus the US dollar. Books reached over S19.5 trillion, and the deal is priced at 12.25%.

“Inclusion in the GBI-EM Index signals growing confidence among international investors in Uzbekistan’s economy and is expected to help broaden the investor base and lower borrowing costs when raising funds from external sources,” said the Central Asian country’s Ministry of Economy and Finance.

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The report, titled “The Islamic Finance Connector Era,” finds that Islamic finance assets grew 13% in 2025 alone, with the sector now spanning close to 100 jurisdictions. Sukuk outstanding stood at USD 1 trillion in 2025, while Islamic banking remains systemically important in 15 countries, according to LSEG analysis based on the Islamic Finance Development Indicator cited in the report.

Standard Chartered argues that the next phase of expansion will be defined less by how much capital is available and more by how effectively institutions can move that capital across borders.

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The Anwar Ibrahim government sold Islamic securities, or sukuk, in two parts to help fund projects, including infrastructure, as well as refinance existing obligations. It priced a USD 850 million note due in April 2032 to yield 4.612% and sold a USD 650 million tranche maturing in July 2036 to yield 4.949%.

As per the Malaysia government, the bonds were 4.7 times oversubscribed, with the strong demand allowing the Southeast Asian nation to tighten final pricing by 30 basis points from the initial price, recording the tightest ever spreads for the country’s global sukuk offerings.

“The strong oversubscription with the tightest ever spread reflects global investors’ continued confidence in Malaysia’s economic prospects and policy credibility,” Second Finance Minister Amir Hamzah Azizan said on July 24.

While Malaysia’s economic growth has surpassed expectations in recent quarters due to tailwinds like robust domestic demand, a surge in semiconductor-related investments, and artificial intelligence (AI) and electronics exports, the fuel subsidy bill will test the nation’s resilience amid the ongoing Iran war.

On July 15, Deputy Finance Minister Liew Chin Tong said that Malaysia’s fuel subsidy expenditure may reach nearly RM40 billion in 2026 if the current geopolitical volatility, along with the oil market conditions, remains.

As per Liew, the Ibrahim government spent almost RM800 million a month on RON95 (grade of petrol with a Research Octane Number of 95) and diesel subsidies in January and February 2026 before the amount surged to around RM5 billion monthly in March and April following the escalation in the Gulf region.

While the subsidy costs moderated to around RM4 billion in May and June as oil prices eased, the administration now expects petroleum product subsidies to total close to RM40 billion for the remainder of the year, depending on the geopolitical developments.

GDP rose 5.8% in the three months through June from a year earlier, beating analysts’ expectations. Apart from the Iran war, the nation will face uncertainties on the trade front as well, with the Donald Trump administration looking to collect new levies from most major trading partners while rebuilding Washington’s tariff warfare mechanisms.

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As per the rating agency’s estimates, the industry was worth about USD 94 billion by the end of the first half of 2026, with Islamic banking accounting for 75% of that total and sukuk outstanding making up a further 22%. Sharia-compliant collective investment undertakings (CIUs) and takaful companies comprised the remainder.

Islamic banks have been gaining ground on their conventional counterparts, now holding around 42% of domestic banking assets, according to Fitch. Growth is being underpinned by strong public demand, a supportive regulatory environment, and broadly stable operating conditions.

“Sukuk’s share of Bahrain’s debt capital market climbed to 37% by the end of the first half of 2026, up from 35% a year earlier. Outstanding sukuk surpassed $20 billion in the period, a 16% annual rise that outstripped growth in conventional bonds. “We forecast government debt, including sukuk, to continue to grow. The net asset value of Bahrain’s sharia-compliant CIUs reached USD 2.5 billion by the end of the first quarter of 2026, up 24.5% year on year,” Fitch said.

The forecast comes even as the broader sukuk market has had a rougher year. Fitch noted separately that global sukuk issuance fell 36% year on year in the first half of 2026 across the GCC, Malaysia, Indonesia, Turkiye and Pakistan, to USD 125 billion, as volatility and rising yields tied to the Iran war weighed on activity. Global sukuk outstanding nonetheless grew 11% to USD 1.1 trillion, with the trajectory for the rest of the year hinging on whether the ceasefire holds.

In Bahrain specifically, Fitch said the Kingdom’s banking system faces limited immediate credit risk from the conflict. The Central Bank of Bahrain has already rolled out a loan deferral and liquidity support program covering all banks in the country.

The sector is also undergoing consolidation, with authorities encouraging mergers to address a market that remains highly concentrated. Fitch said this presents a challenge for both Islamic and conventional lenders, many of which are competing for a limited pool of deposits and lending opportunities in a small domestic economy.

Bahrain continues to host key Islamic finance standard-setting bodies, including the Accounting and Auditing Organization for Islamic Financial Institutions and the International Islamic Financial Market, reinforcing its role as a regional hub even as growth increasingly comes from sukuk issuance rather than balance-sheet expansion alone.

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As per Bashar Al Natoor, managing director and global head of Islamic Finance at Fitch Ratings, the Southeast Asian country has remained a unique “local story” that has successfully buffered itself against external shocks, including geopolitical volatility.

“During the crisis, the Gulf Cooperation Council (GCC) debt markets saw minimal dollar issuances, rising yields, and tighter liquidity, while Malaysia’s market remained resilient with steady foreign investor participation, growing non-sovereign issuance, and innovations like tokenized sukuk, supported by strong ringgit stability and regulatory development. It’s impacted by its own local story,” the senior official told the StarBiz.

Al Natoor expects a resilient debt capital market that will continue to expand as envisioned in Malaysia’s local Capital Market Master Plan (2026 to 2030). Fitch also predicts the nation’s debt capital market (DCM) to expand modestly to reach USD 640 billion outstanding by the 2026-end.

“This growth is anchored by a deep domestic investor base, stable yields, and the ringgit’s performance as one of Asia’s most resilient currencies. Unlike the GCC, where US dollar issuances were scarce during the height of the conflict, activity in the Malaysian market continued almost as normal,” the ratings agency remarked.

“A key trend for the remainder of 2026 is the strategic shift from sovereign to non-sovereign debt. While the Malaysian government is engaging in fiscal consolidation, aiming to reduce federal debt to 60% of GDP by 2030, the private sector is picking up the mantle as well. Non-sovereign issuance rose by 17% year-on-year in the first five months of 2026, accounting for 68% of total DCM activity,” said Bashar, terming the transition a sign of market maturity.

“We expect more non-sovereign to go and issue into the market, and I think that stands out,” he stated, noting that corporate and bank issuers are increasingly defining the market’s trajectory.

“Banks remain the largest non-sovereign contributors, often using sukuk for refinancing and opportunistic funding. The local Islamic banking sector, meanwhile, continues to outpace conventional growth. Islamic banking assets grew by 7% to reach USD 312 billion by the end of 2025, while conventional assets grew by only 4%,” Fitch said further.

Talking about the growth of the Islamic financial ecosystem in Malaysia, the industry now represents 44% of the Southeast Asian country’s total system loans, nearing the Anwar Ibrahim government’s 50% target.

Bashar attributed this success to the most “evolved ecosystem” in the world, which integrates issuers, investors, takaful (Islamic insurance), haj funds, and pension funds like the Employees Provident Fund (EPF) into a cohesive syariah-compliant framework.

“Malaysia has cemented its position as the world’s largest environmental, social, and governance (ESG) sukuk market, holding a 31.6% share of global outstanding ESG sukuk as of mid-2026. ESG-linked debt in the country rose by 44% to USD 20 billion, heavily supported by government tax incentives. Sukuk remains the dominant vehicle for these sustainable investments, accounting for 94% of total ESG debt issuance,” Fitch noted.

Malaysia is also taking a lead role in terms of innovating in the industry. The Southeast Asian nation saw its first tokenized sukuk issuance in the first half of FY 2026. New regulations for private debt will likely further enable this niche.

Bashar, however, warned the use of technology could present a challenge for Malaysia’s Islamic financial ecosystem, as technological advancements are vital for maintaining a competitive edge.

“While the Islamic capital market is domestic-centric, foreign interest remains stable. Foreign holdings of government debt stood at 21.6% at the end of the first quarter of financial year 2026, a high figure compared to other Organization of Islamic Cooperation countries,” he told the StarBiz.

To further attract international capital, particularly from the GCC, the Anwar Ibrahim government plans to launch its first wakalah bi al-khadamat sukuk in 2026. This will bridge the gap between Malaysian and GCC syariah interpretations, potentially opening new inflows of Middle Eastern investments into the Southeast Asian nations.

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It was followed immediately by the UAE Ministry of Finance, which got its inaugural “Sovereign Retail T-Sukuk Programme” successfully launched and listed at the exchange.

The Arab Energy Fund, which shares longstanding engagement with Nasdaq Dubai by contributing heavily to the latter’s Sukuk market, got its Sharia-compliant financial certificate issued under TAEF’s Trust Certificate Issuance Programme through APICORP Sukuk Limited. The Sukuk comprises USD 500 million in trust certificates due in 2031.

The senior unsecured issuance carries a profit rate of 4.686% and was priced at a spread of 70 basis points over SOFR.

Arab Energy Fund’s issuance attracted orders exceeding USD 900 million and was 2x oversubscribed, enabling pricing to tighten from initial guidance. The transaction saw strong and well-diversified demand across geographies and investor types, with high-profile institutions such as central banks, sovereigns, supranational institutions, and agencies (SSAs) taking part in the process, underscoring the strength of TAEF’s credit profile and market positioning.

Stating that “Trust Certificates” are rated Aa2 by Moody’s and AA+ by Fitch, reflecting Arab Energy Fund’s strong credit profile, Vicky Bhatia, the entity’s chief financial officer (CFO), said, “This transaction shows both the strength of our credit profile and our ability to work through difficult market conditions.” Achieving pricing at SOFR+70bps with no new issue premium, despite the challenging market, demonstrates the confidence investors have in the Arab Energy Fund and its mission.”

Hamed Ali, CEO of Nasdaq Dubai and DFM, said, “The Arab Energy Fund’s latest Sukuk listing adds to the depth of Nasdaq Dubai’s Sukuk market and reflects continued activity from supranational issuers in regional debt capital markets. As the Fund’s fourth listing on the exchange, the transaction highlights the role of established issuers in supporting market development and broadening investment opportunities for regional and international investors.”

The latest issuance follows the Arab Energy Fund’s USD 500 million 10-year Sukuk listing earlier this year and forms part of its diversified funding strategy to support sustainable energy development across the Gulf region.

Shifting the focus to the UAE Ministry of Finance’s listing of its inaugural sovereign retail T-Sukuk programme, the event marked the culmination of the Gulf country’s comprehensive strategic effort to broaden its Islamic financial ecosystem, apart from providing innovative sovereign investment instruments that foster a culture of saving and long-term investment across the nation.

“The UAE continues to advance a resilient and inclusive economic model built on a sophisticated financial and legislative infrastructure that aligns with the highest international standards. The listing of the country’s inaugural Sovereign Retail T-Sukuk Program reflects the ministry’s strategic vision to strengthen the efficiency of domestic capital markets and diversify sovereign funding sources, ensuring sustainable financial resources while providing highly secure investment solutions that reinforce the UAE’s long-term financial stability,” said Mohamed bin Hadi Al Hussaini, Minister of State for Financial Affairs.

The inaugural retail T-Sukuk offering recorded exceptional investor demand, as it exceeded official expectations, with subscription requests reaching AED445 million, achieving an oversubscription of nearly nine times the target issuance size of AED50 million. Responding to the strong investor demand, the ministry has increased the issuance size to AED100 million.

The programme also attracted a broad and diverse base of retail investors, as the latter subscribed up to AED10,000, thereby accounting for 76% of the total subscriber base. At 72%, UAE nationals accounted for the largest share of subscribers.

By generating strong participation from young investors under the age of 25 and women, who together accounted for 45% of the total subscriber base, the “Retail T-Sukuk Program” has become successful in terms of advancing financial inclusion.

“The exceptional investor demand for the inaugural offering, which exceeded expectations and achieved record levels of oversubscription, reflects the growing financial and investment awareness among members of society. It also demonstrates the programme’s success in broadening participation in government investment instruments and advancing financial inclusion by providing secure and trusted investment opportunities for all segments of society,” Al Hussaini added.

“This issuance represents an important strategic instrument for deepening the integration between fiscal policy and the country’s key economic sectors by mobilising national capital and directing it towards initiatives that support comprehensive and sustainable development. The Ministry of Finance remains committed to fostering an enabling environment for financial innovation through close collaboration with the Central Bank of the UAE and the country’s financial markets, further strengthening the UAE’s global competitiveness as a leading and sustainable financial centre offering trusted saving and investment opportunities that meet the aspirations of all segments of society,” he concluded.

The inaugural listed issuance carries significant strategic value, with an initially announced issuance size of AED50 million, which was upsized to AED100 million to capitalise on strong investor demand and broad market participation, and a minimum investment threshold of AED1,000, making sovereign investment opportunities more accessible and enabling broader participation by individual investors.

The “Sovereign Retail T-Sukuk Program” has a two-year tenor, offering a profit rate of 4.30% per annum, with returns distributed every six months. The sukuk, now available for trading on the secondary market through authorised exchange brokers, is also supported by dedicated market makers and liquidity providers to ensure efficient price discovery, enhance market liquidity and facilitate seamless trading.

The filings have further strengthened Nasdaq Dubai’s role as one of the world’s leading international venues for Sukuk and fixed-income listings. The exchange currently hosts over USD 98.6 billion in outstanding Sukuk listings and over USD 141 billion in outstanding debt securities, supporting issuers from across the region and international markets while reinforcing Dubai’s position as a global centre for Islamic finance.

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Uganda is raising funds for the 2.7-billion-euro project, which has already won ⁠backing from lenders including the World Bank and the African Development Bank (ADB). Citibank has been appointed to help ‌mobilise financing.

Construction ⁠of the ⁠railway, which began in 2024, is being carried out by Turkish ‌firm Yapi Merkezi.

Apart from financing the crucial infrastructure project, ⁠IsDB has already consolidated its position as one of the African country’s biggest sources of external financing and, as of the end of May 2026, had projects in the East African country worth USD 896.5 million, government data showed.

The 272-km (169-mile) line will ‌reportedly link landlocked Uganda to Kenya’s rail network, ⁠providing crucial access to the Indian Ocean port of Mombasa, through which the African nation imports most of its goods.

Apart from the key funding support from Uganda, it is preparing to issue its first sovereign sukuk, which will partly address the African country’s financing requirements for the construction of a standard-gauge railway (SGR) linking capital Kampala with the Kenyan border town of Malaba.

Talking about Kampala’s upcoming maiden sukuk issuance, it will finance 15% of the estimated 2.7-billion-euro (USD 3.16 billion) cost of the SGR. Export credit agencies, on the other hand, are expected to provide 60% of the project financing, while development finance institutions (IsDB, World Bank, and ADB) would contribute the remaining 25%.

A month back, Deputy Treasury Secretary Patrick Ocailap launched a regional investor roadshow across East African Community (EAC) member states, including Kenya and Tanzania, to build the anticipation ahead of the sukuk issuance. However, not many details have emerged about the size or launch date of the sukuk.

Ocailap said, “The roadshow was intended to test the market, determine pricing and build investor relationships to ensure the success of the operation.” A delegation including representatives from Yusra Sukuk, the lead arranger for the transaction, as well as representatives from Stanbic Bank Uganda and the Bank of Uganda, was reportedly present during the investor roadshow.

While the railway construction contract was awarded to China Harbour Engineering Company in 2015, under an arrangement requiring the contractor to secure financing from the Chinese government, repeated funding delays since the last decade forced the Ugandan government to cancel the contract in January 2023. Authorities later signed a new agreement in October 2024 with Yapi Merkezi to build the connectivity between Kampala and Malaba.

Kenyan President William Ruto in March 2026 inaugurated construction works on a new phase of Kenya’s SGR linking Naivasha to Kisumu, with a later extension planned towards the Ugandan border. The standard gauge railway network has been the lifeline when it comes to travelling between Mombasa and Nairobi and onwards to Naivasha since 2019.

Over the longer term, Kenya and Uganda aim to extend the rail corridor towards Rwanda, South Sudan and the Democratic Republic of the Congo as part of efforts to strengthen regional trade and logistics integration across East and Central Africa.

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