Abdulaziz N. Almarzooq, CEO of KFH Capital—winner of Best Investment Bank in Frontier Markets and in Kuwait—shares his outlook on Arab frontier markets and KFH’s global sharia-compliant edge.
Global Finance: What does the current geopolitical environment portend for frontier markets, particularly in the Arab world?
Abdulaziz N. Almarzooq: Frontier markets in the Arab world are expected to experience varied economic prospects in 2025. Resource-rich economies like the United Arab Emirates and Saudi Arabia are forecast to grow substantially, with economic diversification and reduced dependence on oil the driving forces. GDP growth rates are projected at 5.1% and 3.8%, respectively.
Economic diversification is advancing in the broader Gulf region. Kuwait is honing fiscal reforms and infrastructure investments, Qatar is expanding its liquefied natural gas sector alongside tourism, Bahrain is leveraging financial services, and Oman is investing in logistics and tourism. A similar trend is happening in Morocco with infrastructure investments and trade partnerships, and Jordan with fiscal reforms to further stabilize the economy. Egypt and Tunisia are, however, grappling with high debt and inflationary pressures, with the former relying on the International Monetary Fund for support.
Notwithstanding, geopolitical instability and conflicts pose risks to regional growth, exacerbating economic disparity. Recent regional escalations, such as the Israeli-Palestinian conflict, have resulted in declines in many major Gulf stock markets. Investor uncertainty and geopolitical factors globally, such as trade tensions and inflationary pressures, could also impact growth.
GF: KFH Capital has become a powerhouse investment bank in the region. What is your formula?
Almarzooq: KFH Capital achieved around $24 billion in transactions in 2024 by leveraging its proficiency in Sukuk issuances, client-centric strategies, and innovative financial products. Our leadership in structuring large-scale Sukuk accentuates our market dominance.
Going forward, KFH Capital aims to build on its successes by enriching its offerings of innovative investment solutions, risk management, and diversification to expand its presence in the global landscape of investment banking. Our commitment to digital transformation and strategic portfolio diversification, coupled with ever-increasing demand for Sukuk issuances and Sharia-compliant financial products, suggests substantial growth opportunities.
GF: How vibrant is the Sukuk market?
Almarzooq: In 2023, the Islamic finance industry was estimated at $4.9 trillion in assets; it is expected to reach $7.5 trillion by 2028. Sukuks contribute 17.5% of the total assets; sovereign offerings lead in terms of issuances, with their contribution rising from 60% of total Sukuk issued in 2022 to 64% in 2023. Most notably, the Saudi government undertook a series of deals to refinance $9.6 billion of its domestic Sukuk that were due to mature between 2024 and 2026. This was part of a broader strategy to maintain the kingdom’s presence in debt markets, manage upcoming debt repayments, and facilitate the financing of capital expenditures and infrastructure projects.
GF: Is KFH Capital developing any innovative instruments to propel growth and deepen Islamic capital markets?
Almarzooq: KFH Capital has been at the forefront of advancing the breadth of Islamic finance, developing innovative instruments like Ijarah funds, real estate investments, and cross-border Sukuk structures. These products cater to the diverse needs of investors, all the while adhering to Sharia principles.
A key illustration is our arrangement of a $350 million sustainability Sukuk issuance for KFH-Turkey. The issuance was monumental, resulting in the world’s first tier 2 sustainability Sukuk. The proceeds are earmarked to fund further green and social sustainability projects, reflecting KFH Capital’s dedication to aligning innovative financial solutions with overarching sustainable development goals.
A new structure developed by KFH in 2023 is proving to be a game changer and is being used widely. This strategic innovation in Sukuk structures allows utilizing shares along with hedging mechanisms to broaden the asset base for Wakala Sukuk issuances [in which the investor appoints an agent to invest funds on their behalf].
GF: How critical are sustainability and ESG policies in structuring issuances?Almarzooq: The region is gradually implementing sustainability and ESG policies, although there are issuers that do not have a framework in place yet. Several have established programs and KFH Capital has worked with them. We have a strong commitment to these principles, something that is exemplified by our leadership in the unification of sustainable practices and innovative financial service provision.