DOHA: Valued at an estimated $97bn by the end of 2017, the banking system holds the largest share (81 percent) of Qatar’s total Islamic finance assets. Collectively, Qatar’s four Islamic banks posted 9.1 percent year-on-year growth in assets during the year, resuming its medium-term trend of outpacing conventional banking asset growth.
The increase in Islamic banking growth translated to an increase in Islamic banking penetration reaching 43 percent of real GDP in 2017, up from 4 percent the previous year, according to QFC’s ‘Qatar Islamic Finance Report 2018’.
The report noted that the Asset management industry has a $35bn opportunity in Qatar. “Domestic private wealth is estimated at $35bn, with 290 ultra-high net worth individuals with more than $30m in investable assets. These individuals are being targeted by the QFCRA through special licences granted for foundations and investment clubs, in the former case giving legal.”
The document, launched on the sidelines of the annual Meetings of the Boards of Governors of the IMF and the World Bank Group in Bali, Indonesia, said Sukuk represented 18 percent of Qatar’s total Islamic finance assets in 2017, with total outstanding issuances amounting to $21bn.
The government has been the backbone of the Sukuk market in Qatar, representing 73 percent of issuances between 2013 and the first half of 2018, by value. The cumulative value of sovereign sukuk issuances during this period reached $14bn. Sukuk issued by the Qatari government mainly funds budget deficits and provides working capital.
“The financial sector remains one of the very foundations of this new diversified economy, and institutions such as the Qatar Financial Centre are important examples of Qatar’s commitment to becoming a world-class financial hub. Islamic banks in Qatar have encompassed the largest segment of the Islamic finance market, launching ambitious expansion plans abroad in recent years,” Yousuf Mohamed Al-Jaida, Chief Executive Officer, QFC Authority said.
A relatively large proportion of outstanding sukuk is maturing in 2018, the market will see its future unfold in the coming year depending on the profile of new issuers. The least favorable outcome for Qatar’s sukuk market would be if most of the capital redeemed through the end of 2018 is reinvested elsewhere in sukuk in other markets or into other asset classes.
However, this unfavourable outcome seems to be averted as the QCB ramped up its Sukuk issuances by nearly $3b in 2017, driving 80 percent year-on-year growth in total sukuk issuances.
Although this would contribute to market stability, it would not necessarily develop the market further because it would represent just a rollover of existing issued sukuk and not new supplies. Corporate Sukuk issuances, by number, have been on the rise in 2016 and 2017.
This was primarily driven by QIB issuances tapping foreign capital markets for funding. Nonetheless, the value of corporate Sukuk issued remained flat in the last five years.
