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The report explains how the Sukuk market has emerged in Saudi Arabia and the factors which resulted this emergence. It also talks about the evolution of key funding sources in the Kingdom and forecasts the overall value till 2025

Summary

• Traditionally, bank credit to corporate entities has been for a shorter duration, since financing needs were restricted to meeting working capital requirements
• Sukuk has emerged as an alternative source of funding, with a typical tenure of 5-7 years
• Though Sukuks are offered as long-term instruments, most investors prefer liquidating them in less than 5 years; many corporates in the infrastructure and utilities segments are even issuing Sukuks to fund longer-term projects
• Infrastructural development in the region is driving the demand for long-term funding in sectors such as construction, utilities, cement etc. and thereby further boosting the demand for Sukuk
o The mining sector is also witnessing increased demand for financing, driven by the initiation of various projects
• Implementation of the Basel III norms in KSA is expected to restrain banks from long-term financing, to keep the asset-liability gap under check, as deposits have a shorter tenure
• Reforms in mortgage laws is expected to bridge the gap between demand and availability of housing finance in KSA, representing a huge opportunity in the coming years

Scope

• Overview of Saudi Arabian Financing Market
• Growth of debt financing – macroeconomic aspect
• Evolution of funding market and the growth of key funding sources in Saudi Arabia
• Growth of bank credit
• Trend analysis: Growth of Sukuk as a debt market instrument
• Emergence of Sukuk as a longer term financing vehicle
• Market Outlook

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