Islamic finance assets may hit US$3 tril, says S&P

"We could well be looking at a US$2 to US$3 trillion industry by 2015."

DUBAI: Global Islamic financial assets will double by 2015 to as much as US$3 trillion (RM9.1 trillion) as demand for the securities in the Gulf Cooperation Council and Malaysia lures issuers to the market, Standard and Poor's said.

Yields on syariah-compliant bonds, known as sukuk and paying returns on assets to comply with Islam's ban on interest, dropped to record lows this month, prompting issuers including the Turkish government to sell the securities. Islamic financial assets are currently valued at USS$1.3 trillion (RM3.98 trillion), S&P financial services associate Paul-Henri Pruvost said.

"There is a classic imbalance between demand and offer in the Islamic finance sphere, it's really demand driven," Pruvost said in an interview in Dubai on Monday.

Global sales of Shariah-compliant bonds jumped to US$36 billion this year, just shy of 2011's full-year record of US$36.7 billion, according to data compiled by Bloomberg. The average global sukuk yield fell 102 basis points, or 1.02 percentage points, in 2012 to a record 2.97 per cent on September 14, before rising to 3.03 per cent yesterday, the HSBC/Nasdaq Dubai US Dollar Sukuk Index shows.

That compares with a yield of 4.14 per cent on non-Islamic Middle East bonds tracked by HSBC/Nasdaq Dubai's Middle East Conventional US Dollar Bond Index.

Pruvost said a doubling of the industry's assets by 2015 was a "conservative estimate," and that if they tripled it "wouldn't be shocking."

Turkey sold US$1.5 billion of sukuk in a debut offering this month, receiving bids valued at US$8 billion.

Ireland's Electricity Supply Board is also seeking approval from Malaysian authorities to issue sayariah-compliant notes, Dermot O'Reilly, business development executive at the Irish International Development Agency, said last week.

Still, the value of sukuk sold this year compares with US$2.9 trillion of international bonds sold in 2012, according to data compiled by Bloomberg.

A key hurdle impeding the industry's ability to take a greater share of global business is a lack of cross-border "standardisation," Pruvost said. Bloomberg