Saudi-based Islamic Development Bank (IDB) said on Wednesday it planned a $500 million Islamic bonds (sukuk), issue to finance its 2009 financing programme, the first sukuk issue this year in a tightening industry.

'We are planning to go ahead with the issue in the next few months,' the bank's  chairman Ahmed Mohammed Ali told Reuters on the sidelines of a conference in Riyadh.

The global credit crunch and slowing economies in key Islamic financial centres are applying pressure on the $1 trillion Islamic bond industry and putting it to its biggest test in its 30-year history.

Globally, the value of sukuk issued in 2008 fell more than 56 per cent to $14.9 billion from 2007, according to Standard & Poor's.

Most industry experts have held out little hope for a recovery in the sukuk market this year, as the global economy struggles to avoid a prolonged recession.

Ali said in Riyadh the new sukuk would help finance a 15 per cent increase in the IDB's financing programme for 2009.

The IDB, set up to foster economic and social development among its 56 member states, said in November it was seeking resources to increase its 2009 lending in order to help majority-Muslim member states deal with the financial crisis.

It said it was seeking to lend more than $4.8 billion it lent in 2008.  Ali voiced confidence that the bank, which has a triple A rating as an issuer from both Moody's and Fitch, would easily raise the funds for the sukuk issue.

"The global crisis has made Islamic instruments very attractive placements. There are less options after what happened with Citigroup and other financial institutions," he said.

"It's normal to expect this issue to be priced higher than our last. This is dictated by circumstances in the global market."