Kuala Lumpur: Sales of Islamic bonds may increase 24 per cent this year, led by Southeast Asia, as the region's expansion helps drag the world out of recession, said CIMB Group Holdings Bhd., the leading arranger of such issuance.

Global sales of bonds that comply with the religion's shariah principles, known as sukuk, will probably reach $25 billion this year, Badlisyah Abdul Ghani, chief executive officer of CIMB Islamic Bank Bhd., a unit of CIMB Holdings, said in an interview last week.

"Economic growth will trigger the need for funding," said Badlisyah, whose bank handled 22 per cent of global sukuk sales in 2009. "Most sales will come from this part of the world", with countries including Indonesia and Thailand "moving aggressively to facilitate the industry", he said.

Sukuk sales rose to $20.15 billion last year from $14.13 billion in 2008, according to data compiled by Bloom-berg. Islamic finance bans the payment of interest and stipulates agreements be based on the transfer of goods or services.

The Islamic finance industry's assets under management may swell to $2.8 trillion by 2015 from about $1 trillion as Muslim wealth increases, according to the Kuala Lumpur-based Islamic Financial Services Board. The assets of the top 500 Islamic banks expanded to $822 billion last year from $639 billion in 2008, Standard & Poor's said on February 1.

Developing East Asia, which excludes Japan, Hong Kong, Taiwan, South Korea and Singapore, will grow 8.1 per cent this year, faster than a November estimate of 7.8 per cent, the World Bank said on January 21.

Malaysia, which accounted for about half global sukuk sales in 2009, will continue to dominate the sales, followed by Indonesia, which has the world's largest Muslim population, Badlisyah said.

Infrastructure projects

Thailand plans to sell as much as 50 billion baht ($1.5 billion) of Islamic bonds in the third quarter to fund infrastructure projects, the Islamic Bank of Thailand said on February 1.

Malaysia has eased foreign ownership rules and approved new products as part of efforts to become a hub for Islamic financial products.

Rising numbers

  • $25b Expected global sales of Islamic bonds this year
  • $20.15b Sukuk sales in 2009