Arab News: Egypt accounts for 48 percent of Africa’s outstanding sukuk, making it the continent’s largest market, as regulatory reforms and closer economic ties with the Gulf Cooperation Council support growth, according to Fitch Ratings.
In its latest report, the credit rating agency said African sukuk crossed $7 billion outstanding in August, up 16 percent year on year.
Fitch said sukuk is emerging as an alternative source of funding for some sovereigns on the continent, allowing them to diversify their funding sources and attract demand from GCC and African Islamic banks, Shariah-compliant investment funds and multilateral institutions.
The market remains underdeveloped, however, with enabling regulation lacking in most African countries and domestic Islamic financial institutions small or absent in many markets.
“Egypt issued its debut US dollar sovereign sukuk in 2023, and is subsequently emerging as a regular and substantial issuer of US dollar sukuk following regulatory reforms and deepening ties with the GCC. It also issued its first local-currency sukuk in 2025, and continued issuance into the first half of 2026,” said Fitch.
It added: “This helped attract demand from Egyptian Islamic banks, which hold about a 5 percent share of banking system assets and had faced a lack of Shariah-compliant investment options.”
The report added that Egypt’s general government debt will fall to 77 percent of GDP by financial year 2027, which could affect sukuk supply.
Sukuk concentration
Egypt is followed by Nigeria at 26 percent, South Africa at 15 percent and Benin at 7 percent, the credit rating agency said.
The concentration highlights the uneven development of Islamic capital markets across Africa and Egypt’s position as the continent’s dominant sukuk issuer.
Earlier this month, two government officials who spoke to Asharq Bloomberg revealed that Egypt is planning to issue the first tax sukuk in its history during the current fiscal year, offering returns that are fully exempt from taxes.
The value of the sukuk and the return due on it will later be used to settle taxes owed by the taxpayer.
Growth continues, but issuance stays sporadic
Around $1 billion of African sukuk has been issued so far in 2026, mainly by Benin and Egypt, compared with $3.3 billion in the full year 2025. The decline in new issuance this year underlines how dependent the market remains on a limited group of sovereigns able and willing to access the instrument.
Enabling regulation for sukuk is absent in most African countries.
Domestic Islamic financial institutions, which typically serve as both key investors and potential issuers, are either small or non-existent in many markets. Debt capital markets across the continent also remain underdeveloped.
The broader African debt capital market reached $1.6 trillion outstanding as of August. South Africa accounts for 39 percent of that total, Egypt 18 percent and Nigeria 9 percent.
Conventional bonds make up the overwhelming majority, while the sukuk share remains below 1 percent.
Fitch rates about $3.7 billion of African sukuk outstanding as of the end of the first half of 2026, of which all are speculative grade.
Roughly 67 percent carries a “B” rating and is located in Egypt; the remaining 33 percent is rated “BB” and is located in South Africa. All rated issuers hold a stable outlook.
https://www.arabnews.com/node/2655181/business-economy
