The long-term prospects for global sukuk issuance are still good despite a dramatic decline in volumes last year due to constrained global debt markets, says Standard & Poor’s Ratings Services.

“The decline in sukuk issuance in 2008 was as a result of global market turmoil, drying up of liquidity, widening of credit spreads, and investors’ wait and-see attitude,” said Mohamed Damak, a credit analyst at Standard and Poor’s, in a report on the long-term outlook for the sukuk market.

He added that part of this decline could also have been caused by comments about the Shariah compliance of some sukuk by the Accounting and Auditing Organisation for Islamic Financial Institutions.

The value of sukuk issued last year dropped by more than 56 per cent compared with 2007, to US$14.9 billion (Dh54.72bn). “We do not expect the market to start reviving before the second half of 2009, or early 2010,” said Mr Damak.

The past four years have witnessed a growing popularity for Shariah-compliant securities in the MENA region, with the $100bn sukuk market doubling each year up until 2008. Although viewed as a promising sector of international debt markets, sukuk have witnessed more than a $10bn drop in sales since the beginning of last year.