CAIRO, Aug 26 – Egypt accounts for 48% of Africa’s outstanding sukuk, making it the continent’s largest Islamic finance market as regulatory reforms and stronger economic ties with Gulf countries support the expansion of Shariah-compliant financing, according to Fitch Ratings.
The credit rating agency said in its latest report that African sukuk outstanding exceeded $7 billion in August, representing a 16% increase from a year earlier. The market is increasingly providing African governments with an alternative source of financing while helping diversify their investor bases.
Sukuk are financial instruments structured to comply with Islamic principles and are increasingly being used by African sovereigns to attract capital from Gulf Cooperation Council investors, African Islamic banks, Shariah-compliant investment funds and multilateral institutions.
Fitch said Egypt’s development as a regular sukuk issuer has been supported by regulatory changes and closer economic links with the GCC. “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,” Fitch said.
The agency added that Egypt entered the local-currency sukuk market for the first time in 2025 and continued issuing during the first half of 2026. The expansion has also created additional investment opportunities for Egypt’s Islamic banks, which account for about 5% of total banking-sector assets.
Fitch said this is particularly relevant because Egyptian Islamic banks have historically faced a limited supply of Shariah-compliant investment instruments.
Egypt’s dominance of the market is followed by Nigeria, which accounts for 26% of outstanding African sukuk, while South Africa represents 15% and Benin 7%. The distribution illustrates the relatively concentrated nature of Islamic capital markets across the continent.
Despite the expansion, the broader market remains at an early stage of development. Fitch said regulatory frameworks needed to facilitate sukuk issuance are absent in most African countries, while domestic Islamic financial institutions remain relatively small or are not present in many markets.
About $1 billion of African sukuk has been issued so far in 2026, largely by Egypt and Benin, compared with $3.3 billion issued during the whole of 2025. The slower pace of issuance this year highlights the market’s dependence on a relatively small number of sovereign issuers with the capacity and willingness to access Islamic financing.
The broader African debt capital market was valued at approximately $1.6 trillion outstanding as of August. South Africa accounted for 39% of the total, followed by Egypt at 18% and Nigeria at 9%. Conventional bonds continue to dominate the market, with sukuk representing less than 1% of total outstanding African debt.
Egypt could also expand its use of Islamic financing through new instruments. Two Egyptian government officials recently said the country was considering its first tax sukuk during the current fiscal year. Under the proposed structure, returns would be exempt from taxation, with the sukuk proceeds and associated returns subsequently used to settle tax liabilities.
Fitch’s assessment also highlights the credit-quality constraints facing the African sukuk market. The agency rated approximately $3.7 billion of African sukuk outstanding at the end of the first half of 2026, with all rated instruments falling within speculative-grade territory.
Around 67% of Fitch-rated African sukuk carries a B rating and is issued in Egypt, while the remaining 33% carries a BB rating and is issued in South Africa. Fitch said all of the rated issuers have stable outlooks.
Egypt’s growing role therefore stands out against a market that remains relatively small compared with conventional African debt. Continued regulatory development, deeper Islamic banking markets and stronger links with Gulf investors could determine whether sukuk expands beyond its current concentration in a few sovereign issuers.
