CMA Announces Corporate Sukuk And Debt Capital Market Growth Exceeding SAR30 Billion Since 2019

The Capital Market Authority (CMA) has announced that the sukuk and debt capital market in Saudi Arabia has experienced significant growth in recent years. According to a press release issued by the CMA, the market has achieved an annual growth rate of 7.9% since 2019, with unlisted issuances growing at an even higher rate of 9.6%. The number of issuers has also increased alongside the market's growth.Since 2019, the unlisted sukuk and debt capital market has grown by approximately SAR33 billion, reaching approximately SAR105 billion in 2023, compared to SAR72 billion in 2019. This growth is a testament to the efforts of the CMA to develop the sukuk and debt capital market as an important financing alternative for public and private sector projects.Recognizing the importance of this market for economic growth, the Financial Sector Development Program (FSDP) formed the 'Sukuk and Debt Instruments Market Development Committee', chaired by the chairman of CMA. The committee aims to unify efforts and set strategic directions to further develop the sukuk and debt capital market, aligning with the goal of creating an advanced capital market.The Sukuk and Debt Instruments Market Development Committee has already implemented several initiatives to deepen and enhance the liquidity of the market. These initiatives have resulted in positive developments, including increased liquidity, a more diverse investor base, and a significant increase in the number of issuances and issuers.By the end of 2023, the size of the corporate sukuk and debt capital market reached SAR125 billion, compared to SAR95 billion at the end of 2019. The number of companies issuing debt instruments has also tripled during this period.In terms of liquidity, the market has experienced rapid growth in both the value of trades and the number of executed transactions. In 2023 alone, there were a record number of executed transactions, with a traded value of SAR2.5 billion, compared to SAR0.8 billion in 2019.Fahad bin Hamdan, the CMA Deputy Assistant of Financing and Investment, highlighted the CMA's aim to make the sukuk and debt capital market prosperous for both governmental and non-governmental issuances. The CMA also seeks to develop the legislative and regulatory environment by providing modern investment mechanisms and products to attract investments from local and foreign investor groups.Bin Hamdan further noted the diversification of the investor base in the corporate sukuk and debt capital market. The share of individual investors has risen significantly, thanks to the successful completion of a public offering of sukuk in the fourth quarter of 2022, which attracted over 125,000 individual investors. On the other hand, the share of banks and government entities has decreased, while the share of investment funds has increased.Looking ahead, the CMA will continue to collaborate with the Sukuk and Debt Instruments Market Development Committee and stakeholders to further develop the corporate sukuk and debt capital market. This will be achieved through a portfolio of initiatives aimed at enhancing its attractiveness and efficiency for issuers and investors, as well as boosting its regional and international competitiveness.The focus will be on developing the legislative environment, incentives, and infrastructure to encourage issuers to issue sukuk and bonds locally. Efforts will also be made to enhance trading in this capital market and encourage greater investor participation.To measure the performance of these strategic initiatives, the CMA will monitor several indicators, including the volume of funds collected from sukuk and debt instrument offerings as a percentage of total public financing, the size of debt instruments as a percentage of GDP, debt instrument turnover, and the percentage of foreign ownership in debt instruments.In conclusion, the CMA is committed to overcoming challenges facing issuers, investors, and infrastructure in order to fully capitalize on the opportunities offered by the sukuk and debt instruments market for financing domestic companies. This will be achieved through various solutions, including easing regulatory frameworks, introducing sustainable bonds regulatory frameworks and incentives, removing requirements for withholding tax on local companies' debt instrument issuances, and organizing the sukuk and debt instruments market industry.For more information on the strategic directions to develop the sukuk and debt capital market, interested parties can visit the CMA's website at www.cma.org.sa.

With inputs from SPA