Some BAD 52bn (USD 137bn) worth of Islamic bonds were issued in 2012, marking a sharp 47% y/y increase, the International Islamic Financial Market (IIFM) said in a new report. The reading reflects recovering investor interest and rising Islamic finance status. The key global sukuk issuers are the GCC states and Malaysia. Aggressive public spending in the GCC and other large Islamic states will thus help boost sukuk issuances in the near-to-medium term.

“This year has also started on a positive note and as per the report over BAD 4bn (USD 11bn) worth of sukuk were issued in January 2013 and the growth trend is expected to continue in coming years,” Ijlal Ahmed Alvi, Chief Executive Officer of IIFM, said.

The IIFM underscored the trend of sukuk issuance in non-local currency such as an issuer based in the UAE issuing a sukuk in Malaysian Ringgit and an issuer based in Malaysia issuing a sukuk in Chinese Yuan. “The risk arising from currency or rate of return mismatches can be managed by Islamic hedging documentation and product standards being published by IIFM and ISDA and will provide further confidence to investors in Sukuk,” said Alvi.

Funding needs and large infrastructure investments in the GCC region and Malaysia, coupled with better global investor sentiment, will help keep global Islamic bond issuances strong in 2013 as they are expected to exceed USD 100bn, Standard and Poor’s has recently said. Moreover, a number of banks will tap the sukuk debt market in 2013 to refinance existing debt and seek larger amounts to match the credit needs of their corporate clients, especially in project finance, S&P said. But despite strong growth, the sukuk debt market still reportedly constitutes a small segment of the global fixed-income world.