The Middle East and North Africa (MENA) region is witnessing a boom in sustainable finance, with the sukuk market experiencing significant growth in the first half of 2024, according to Bloomberg’s Capital Markets League Tables. This surge contrasts sharply with the Islamic loan market, which has seen a decline in activity.

Fueled by environmental, social, and governance (ESG) initiatives and sovereign issuances, sukuk issuance in the MENA region skyrocketed. Volumes for ESG-linked sukuk, earmarked for green and social projects, jumped an impressive 48% year-on-year, reaching a total of $6.2 billion from eight issuances. 

Saudi Arabia emerged as the top issuer, contributing $3.98 billion through five sukuk offerings, while the UAE followed closely with $2.25 billion. Regional banks, including Emirates Islamic, with its $750 million debut issuance, played a crucial role in this growth.

This positive trend reflects the region’s growing commitment to sustainable investing, especially after the UAE made significant climate finance pledges during COP28 last year. 

However, the story is different for Islamic loans. Despite offering competitive rates and terms compared to conventional loans, the Islamic loan market lagged behind the bond market surge during the first half of 2024. Volumes in the MENA region hovered around $13.35 billion, marking a 21% year-on-year drop and mirroring the subdued activity seen in the bond market since the pandemic.

Sovereign issuances were a major driver in the sukuk market. Saudi Arabia led the pack with $33.6 billion raised in local and international capital markets, followed by Malaysia ($4.3 billion) and the UAE ($2.9 billion). 

Notably, Saudi Arabia issued a $5 billion sukuk in three, six, and 10-year tranches, while Bahrain issued a $1 billion seven-year sukuk.