UAE's bond and Sukuk issuances surpass $309.4 billion by end of Q1 2025
In Q1 2025, the United Arab Emirates (UAE) witnessed a remarkable surge in its bond and Sukuk market, with issuances amounting to $24.1 billion. This growth is primarily attributed to increased investor confidence in Shariah-compliant, asset-backed instruments like Sukuk, particularly Treasury Sukuk (T-Sukuk) backed by government projects.
Sukuk issuance saw a 28% jump in Q1 2025, reaching $6.5 billion, with notable oversubscription rates. For instance, the February T-Sukuk auction was oversubscribed 6.5 times, reflecting strong demand and trust in these instruments.
This growth can also be linked to the UAE's expanding Islamic finance assets, which reached $300 billion by Q1 2025, up 16% year-on-year. This growth has made the market more attractive amid uncertain traditional bond markets.
Innovative issuances like Tabreed’s inaugural $700 million green Sukuk, oversubscribed nearly 2.6 times, underscore rising investor appetite for sustainable and ethical finance options in the UAE.
Key factors contributing to this growth include the asset-backed and Shariah-compliant nature of Sukuk, seen as more stable during market volatility. There has also been an increase in the issuance of government-backed T-Sukuk linked to public infrastructure projects, providing secure investment vehicles.
The UAE government's proactive facilitation and promotion of Islamic finance products, including green Sukuk, have also played a significant role. Rising global interest in ethical and ESG-linked financial instruments, with ESG Sukuk volumes growing strongly, is another key factor. Lastly, strong institutional investor demand both locally and internationally for sukuk as diversified, resilient fixed-income instruments has been a driving force.
The UAE has rapidly emerged as a major global hub and leader in Islamic finance and Sukuk issuance. It is expected to play a leading role in the global Sukuk market, which is projected to reach $190-$200 billion in total issuance in 2025. The UAE's strong issuance volumes, oversubscription rates, and development of innovative Sukuk products position it as a key global player, competing alongside established markets like Malaysia and Turkey.
In terms of the UAE's global position, it holds a notable 15.6% share in the GCC Sukuk market. The UAE also ranks fourth worldwide after Malaysia, Saudi Arabia, and Indonesia in terms of Sukuk issuance. The UAE holds the second-largest share in the GCC debt market, accounting for 30% of the total.
The UAE remains one of the largest issuers of US dollar-denominated debt in emerging markets, holding a 7% share of the global market in Q1 2025. The value of outstanding GCC debt reached $1.03 trillion by the end of Q1 2025.
In summary, the UAE's bond and Sukuk market experienced a 8.3% growth in Q1 2025, with outstanding debt reaching $309.4 billion. The surge in the UAE's debt markets reflects the nation's growing financial ecosystem and its strategic role in the global Sukuk market. Bashar Al Natoor, Managing Director and Global Head of Islamic Finance at Fitch Ratings, emphasized the UAE's significant position globally, with the country holding 6.5% of total global Sukuk as of Q1 2025. Notably, the UAE ranks third among emerging markets (excluding China) for ESG-related Sukuk and bonds.
The UAE's significant growth in its bond and Sukuk market, particularly in Q1 2025, is driven not only by the rising investor trust in Sukuk, but also by the increasing demand for sustainable and ethical finance options, as evident in the oversubscription of Tabreed's green Sukuk.
The expansion of the UAE's Islamic finance assets, which surged to $300 billion by Q1 2025, and the promotion of Islamic finance products by the government are key factors that contribute to the nation's leadership role in the global Sukuk market.
