The Challenges of Developing the Saudi Sukuk Market in Line with Objectives of Vision 2030

Abstract

The paper aim to explore the impact of five challenges on the development of sukuk issuances market in the Kingdom in line with the financial sector development plans within vision 2030 objectives . The study adopted quantitative method by distributing a questionnaire to 115 experts involved in the Saudi sukuk market . The results have been analyzed by Smart PLS 3, and it showed a statistically significant effect on the relationship between the five challenges and the sukuk market development in the Kingdom. At the level of sub-challenges , the results have showed that there was no statistically significant impact between the legal framework regulating sukuk issuance in the Kingdom and sukuk market development. While there was a statistically significant impact of the other four challenges on sukuk market development, namely: (1) Shari'ah governance, (2) secondary market activation, (3) the credit rating (4) yield curve. The research has recommended setting a mandatory framework of Shari'ah governance for sukuk issuance, allowance to retail investors for trading in sukuk , requiring sukuk issuers to credit rating the local sukuk issuance, and finally announcement of the yield curve on Saudi government sukuk and considering it as a benchmark pricing index.

How does financial risk affect sukuk market development? Empirical evidence from ARDL approach

“…In line with the financial sector development plans within 2030 vision objectives, Alnagar et al. (2021) identify the level of impact of five challenges on Saudi SMD.…”

“…Theoretical and empirical studies on the determinants of stock and bond markets development in both developed and emerging countries have been multiplied during the last decades showing their considerable importance in the process of economic growth and development ( Eichengreen and Luengnaruemitchai 2004 , 2006 , Burger and Warnock 2006 , Claessens et al., 2006 , 2007 , Ben Naceur et al., 2007 , Yartey 2008 , Eichengreen et al., 2006 , 2008 , Bae 2012 , Bhattacharyay 2013 , Mu et al., 2013 , Laeven 2014 , Felman et al., 2014 , Gray et al., 2014 , Suarez 2014 , Burger et al., 2015 , Ayala et al., 2016 , Smaoui and Khawaja. 2017 , Smaoui et al., 2017 , Teplova and Sokolova 2018 , Al-Raeai et al., 2018 , Huong, 2020, Alnagar et al., 2021 , Boukhatem 2021b , etc.). However, the growing importance of Sukuk around the world has recently involved an increasing interest in the research on sukuk markets due to the roles they played in contemporary Islamic economies.…”

“…Interestingly, Saudi sukuk market has become key economic contributor in recent years. During 2019, Saudi Arabia financed 50% of its fiscal deficit through local-currency denominated sukuk, and that instead of the high dependency on bank financing and the declining the contribution proportion of debt instruments (sukuk and bonds) in financing compared to stock markets ( Alnagar et al., 2021 ).…”