Sukuk industry booming in GCC region

Gulf Islamic bond sales are beating Sharia-compliant loans in the Middle East, Europe and Africa (EMEA) for the first time since 2006 as borrowers seize on tumbling yields to finance roads and airports.

Gulf Islamic bond sales are beating Sharia-compliant loans [2] in the Middle East, Europe and Africa (EMEA) for the first time since 2006 as borrowers seize on tumbling yields to finance roads and airports [3].

Sales of sukuk in the Gulf Cooperation Council (GCC) have almost quadrupled this year to $18.5 billion [4] as Saudi Arabia's state-run Civil Aviation Authority and Qatar's government sold $4 billion each, according to data. Loans that comply with Islam's ban on interest, by comparison, have risen 57 per cent to $11.4 billion in EMEA.

Borrowers in the GCC, home to about a third of global oil reserves, will rely more on Islamic bonds after yields dropped to a record, Standard & Poor's said in a report on October 8. GCC sukuk sales make up about half of this year's record $38.3 billion of global sales. The average yield on global sukuk fell 103 basis points, or 1.03 percentage points, in the period to a record 2.96 on Tuesday, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index.

"Sukuk are becoming a legitimate competitor for traditional Islamic loans and you will see them staying like that for a while," Abdul Kadir Hussain, chief executive of Mashreq Capital DIFC, which had $265 million in assets under management in June, said by phone from Dubai on Tuesday.

"It's now a product that is more known to investors and issuers." Companies and government agencies in Saudi Arabiahave raised a record $8 billion from sukuk this year. - Bloomberg News as the state spends more than $500 billion to create jobs, build airports, roads and houses.