Dubai: The global market for sukuk issuance fell by 54.5 per cent in 2008 according to a new report.The Global Sukuk Report 2008 by Global Investment House cited that the amount raised by sukuk, or Islamic bonds, totalled $15.1 billion (Dh55.5 billion) last year, compared with $33.1 billion in 2007. At the same time however, the number of sukuk issued worldwide increased from 129 to 165 in 2008.
The impact of the global financial downturn has only recently begun to be felt in the Gulf region. Consequently, the Global Investment House report recorded that the majority of sukuk were issued in the first three quarters of 2008, with only 26 sukuk issued in the final three months - an indication of the correlation with the impact of the global economic slowdown on the region.
At the same time, the market for sukuk issuance, and Islamic finance instruments in the Gulf was noted to be growing. The Gulf Cooperation Council (GCC) was the largest issuer of sukuk last year, followed by Malaysia."The Islamic bond market is still concentrated in the GCC region and Malaysia, in terms of dollar amount. GCC countries accounted for 55.5 per cent of the dollar amount issued, while Malaysia accounted for 36.3 per cent," according to the report's findings.
The market share for sovereign issued sukuk is also increasing, with 73 sovereign sukuk issued in 2008, compared to 32 in 2007, an indication of the growing importance of the debt instrument to raise government funds.
Over half of Gulf states are already issuing sovereign sukuk, with the UAE leading the way.
In 2008, the UAE was the second largest market for sukuk raising, with Dh19.5 billion raised from 10 issues.
This was marginally behind Malaysia, which raised Dh20 billion. The only other country to have raised over $1 billion from sukuk was Saudi Arabia, out of a total of ten states which issued sukuk last year.
According to economists, Islamic financial instruments, such as sukuk, can become a serious alternative to conventional capital raising for regional governments as a response to current economic challenges.
"Islamic finance has proved, to date, resilient ti financial contagion and crisis," said Nasser Saidi, chief economist at Dubai International Financial Centre (DIFC), this week.
"The timing is right for governments to develop and use Islamic finance instruments, primarily sukuk, as an integral part of public finance," he said.
