Sukuk issuance in 2011 hit a record $85 billion, which was two-and-a-half times the pre-financial crisis record of $33 billion issued in 2007, said a top official.

'This huge increase indicates that the Islamic capital markets are back in the game,' Luxembourg for Finance chief executive Fernand Grulms told delegates at the World Islamic Funds and Financial Markets Conference (WIFFMC2012) in Bahrain.

'Nevertheless, we should set the figure in context. In the conventional debt markets, in 2011, $5.4 trillion were issued in the US alone and the sukuk market in 2011 was driven largely by Malaysia. In other words, the short answer to the question of are Islamic investments building international reach and scale is a yes and a no.'

'Sharia-compliant capital markets activity currently still remains a niche market but certainly can and will build international reach and scale.

'Islamic finance is no longer limited to the countries in which it began, or to the early adopters and one of the key hurdles to achieving international reach and scale is a lack of transparency in the product development area.

'The absence of a consistent published set of legal rules can be perceived by the market as uncertainty, inefficiency, increased time to market and increased costs, which are elements that markets dislike,' Grulms said.

Conference managing director David McLean said with the sukuk markets already off to a strong start in 2012, recent reports are indicating that there will be a significant increase in issuances this year.

'The issuances in the first quarter of 2012 have already reached approximately $43 billion worldwide, which is nearly half of the total issuance in 2011.

'This year may see new jurisdictions joining the Islamic financial markets particularly from the Asia Pacific and the Mena region. With significant infrastructure and social development expenditure in these key markets, along with challenging global conventional bond market conditions, market borrowers are seeking to diversify to other alternate funding sources.

'Given the continued level of liquidity within the overall Islamic investor base, Islamic instruments are emerging as an increasingly attractive and viable alternative,' he said. – TradeArabia News Service