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 .
Sales of sukuk in the Gulf Cooperation Council (GCC) have almost quadrupled this year to $18.5 billion  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.