Malaysian official: Sukuk becomes long-term financing tool for global economy

Sukuk (Islamic bonds) has evolved into a globally recognized asset class, a liquidity instrument, and a long-term financing tool for the world economy, Adnan Zaylani Mohamad Zahid, Deputy Governor of the Central Bank of Malaysia, stated during panel discussions at the Islamic Development Bank (IsDB) Group's 51st Annual Meetings in Baku, Report informs.

Mohamad Zahid noted that the outstanding value of the global sukuk market has surpassed $1 trillion, nearly five times higher than a decade ago, and is expected to reach $1.8 trillion by 2030.

According to him, the growth of the sukuk market is also driven by the rise of sustainable and ESG-linked sukuk. The outstanding value of labeled sukuk was estimated at around $70 billion by the end of 2025, reflecting capital flows into environmentally and socially beneficial projects, he said.

The deputy governor added that although labeled sukuk currently accounts for about 6% of the global sukuk market, its penetration is comparable to the sustainable bond segment, which represents roughly 5% of the global bond market. However, the scale difference remains significant, as the sustainable bond market is approaching $7 trillion worldwide, highlighting the considerable potential for further growth of labeled sukuk, he said.

Mohamad Zahid stressed that meeting the needs of developing economies requires substantial investment, citing climate transition costs of over $2 trillion annually by 2030 and a broader financing gap exceeding $4 trillion per year to achieve the Sustainable Development Goals. He argued that labeled sukuk can play a decisive role by aligning financial principles with sustainability objectives, offering not only financing solutions but also value-based pathways that promote risk-sharing, social inclusion, and real economic impact.

The official emphasized that mobilizing impact capital on a large scale requires a solid foundation built on clear regulation, strong governance, and market certainty: "Trust is the currency of any capital market. For labeled sukuk, trust is established through consistent standards, robust governance, transparent disclosures, and deep, well-functioning markets. Without these foundations, capital hesitates; with them, capital becomes a catalyst."