Volatility in bond and equity markets along with the Eurozone crisis are drawing new investors to Islamic financial services, particularly Islamic insurance (Takaful) and Islamic bonds (sukuk). The UAE has positioned itself as one of the leading sources for these products.
Last year was a record year for the global sukuk market, with over €3.5 billion in issues between January and November 2011. This year is expected to be equally strong, especially since over the first half of 2012, sukuks have outperformed most conventional bonds. One factor behind sukuk growth is Dubai’s recovery from crisis. In 2009, many feared that sukuks issued in Dubai would not be repaid, but that fear has proved to be unfounded.
The Takaful (Islamic insurance) industry has also seen exceptional growth in recent years and is expanding particularly rapidly in the GCC countries. Ernst and Young predicts that the international Takaful industry will reach a total value of €19.9 billion by the end of 2015, and Deutsche Bank forecasts that the Islamic-finance sector overall will almost double over the next four years to reach a total €14.4 trillion in assets worldwide. Sukuks and Takaful are two key factors driving that growth.
