Credit crunch slows Islamic bond market

Growth in the sukuk market has slowed due to the current tough market conditions, according to ratings agency Standard & Poor's.
The agency says that the sukuk market grew to more than $60bn in 2007 and is expected to hit $100bn in a few years.

However, it adds that it would be growing more quickly were it not for widening credit spreads and a drying up in liquidity that have also affected other capital market products.

Although some deals have been postponed because of the difficult market conditions, Mohamed Damak, credit analyst at Standard & Poor's, predicts that the number and value of bond issues will pick up as the market recovers.

"We expect sukuk growth to remain on the same impressive trajectory, fuelled by huge investment and financing needs, notably in the countries of the Gulf and Asia," says Damak.

He adds that although the dollar has been the predominate currency for sukuk issuance over the past five years, attention is increasingly being given to other currencies as a result of the dollar weakness.