Some $10-15 billion of sukuk (Islamic bonds) have been shelved since the onset of the financial crisis because the specialised debt instruments became a replica of conventional bonds, said a banking expert.

New issuance of sukuk completely dried up because Islamic banks were structuring them incorrectly from the start, said Sohail Zubairi, chief executive officer of Dubai Islamic Bank unit Dar al-Sharia, which advises on how to structure Islamic products.

'We lost at least $10-15 billion since the onset of the crisis, I'm talking about 2008 second half,' Zubairi told the Reuters Islamic Banking and Finance Summit in Dubai.

Zubairi said companies looking to issue sukuk had been approaching banks with a proposed sum of money they wanted to raise, say $1 billion, and soliciting bids - much like they would do if they were seeking to issue conventional bonds.

Instead, authentic sukuk issues should involve the company targeting investors first with a business proposal and inviting them to invest in the company or project.

The company would also say how much it expected to generate from the project and the size of a potential return, payable regularly.

'Sukuk collapsed because the starting point was conventional. If the starting point would have been correct, I'm sure we would still have been up and running,' Zubairi said.

'The sukuk that were done, I'm sorry to say, were a step-sister of conventional bonds,' he said. 'If sukuk were done in the correct manner I think today people will be running to sukuk.'

Demand for investments and financial services that comply with Islamic law has been growing as Muslims seek what they see as more ethical ways to investment their money. Islam bans receiving interest, as well as investing in companies dealing in alcohol or gambling.

The sukuk market is unlikely to rebound until bonds do as it is so intertwined, Zubairi added.-Reuters