KUALA LUMPUR: The global sukuk market has surpassed US$1 trillion in outstanding debt by end-2025, with Malaysia playing a central role in its expansion as the largest contributor to the sector’s expansion last year.
Islamic financial products, once viewed as a niche segment of global finance, have now firmly established themselves within the mainstream international financial system, said Ji Zhuang, Bloomberg head of indices for Asia Pacific.
What was previously a small and specialised asset class has evolved into a fast-growing pillar of global debt markets, reshaping how investors assess ethics, risk management and long-term value creation.
However, Ji cautioned that Malaysia’s leadership position in the region is now approaching a critical inflection point.
He said the rapid expansion of Islamic finance will stall without the market standardisation required for reliable scalability.
“As a market hub, Malaysia has the potential to act as a gateway to international finance, but if national and regional fragmentation persists, that opportunity will be lost.
“The sector must continue to embrace rigorous, rules-based benchmarking that transcends regional borders to unlock the market’s full potential,” he told Business Times.
Ji said Malaysia must continue driving innovation while developing local talent for the global sukuk market to move beyond the US$1 trillion mark, as estimated by Bloomberg.
He added that transparent, reliable and data-driven standards would further boost Malaysia’s global connectivity.
“To fully capitalise on these opportunities, Malaysia would benefit from maintaining strong governance and methodological transparency while encouraging its neighbours toward regional standardisation,” he said.
“At this pivotal moment, Malaysia is taking the right steps to grow a world-class Islamic finance ecosystem, instilling confidence among global investors.
“These efforts are likely to strengthen Malaysia’s economic relationships, expand its regional influence, and position the country as a significant leader in shaping the future of Islamic finance and responsible investment worldwide,” he said.
Ji added that Malaysia has not been standing still, citing its deep liquidity, mature regulatory framework and strong reputation among global investors as an accessible Islamic finance hub.
He pointed to Bank Negara Malaysia’s introduction of the Malaysia Islamic Overnight Rate, which serves as a benchmark average rate of return for interbank transactions and reflects ongoing efforts to strengthen the country’s Islamic financial ecosystem.
More recently, the Securities Commission launched its Capital Market Masterplan 2026-2030, which reinforces the country’s ambition to become a global hub for innovative Islamic finance.
“Anchored in core Maqasid al-Syariah principles of fairness, transparency and accountability, the approach is designed to appeal beyond Muslim investors to a growing global audience seeking ethical investments with a positive social and environmental impact,” Ji said.
Still, he said market adoption remains uneven.
“Despite global investors increasingly seeking to incorporate Syariah-compliant assets into their portfolios.
“Previously, a scarcity of Syariah assets was the key barrier to market access, but today the primary challenge has shifted to investors’ need for clarity and consistency in compliance,” he said.
He explained that while the core principles of Islamic finance are well understood, including the prohibition of interest, avoidance of excessive uncertainty and speculation, and exclusion of sectors such as gambling and tobacco, interpretations of Syariah compliance vary and lack a global industry standard, creating uncertainty for international investors.
Against this backdrop, he said that standardisation alone is not enough; information infrastructure is equally critical.
He said market indices, which provide rules-based transparency, benchmarking and data, are essential in building investor confidence and easing participation.
“Islamic finance has already seen plenty of innovation in terms of product development, particularly in credit and equities markets.
“What is required now is innovation in measurement and index tracking that meets both Syariah requirements and institutional standards,” Ji said.
He added that market participants like Bloomberg have responded by introducing Syariah Sukuk indices that deliver rules-based metrics and uphold robust governance standards.
“These enhance market visibility across currencies, segments, and regions. Yet they are far more than mere tools for tracking performance.
“They empower investors with the transparency essential to build, benchmark, and evolve Syariah-compliant portfolios. That will help foster the market confidence needed to propel Islamic finance into its next era of global growth,” Ji said.
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