Middle Eastcompanies and governments have issued more sukuk (Islamic bonds) by value so far in 2009 than they did in the whole of 2008.

Borrowers have raised more than $7bn through sukuk this year, compared with $6.7bn in 2008, as they return to the market for Islamic debt. However, the market for sukuk has yet to return to its 2007 peak, when Middle East issuers raised more than $13bn via Islamic securities.

Institutions raised $3.7bn and $3.5bn respectively through sukuk in the second and fourth quarters of 2009, making them the most active quarters since the second quarter of 2008, when $4.5bn was raised via sukuk.

In the worst period of the financial crisis – the fourth quarter of 2008 – Middle East companies and governments raised just $200m through sukuk.

However, although the market is more buoyant than it was in 2008, sukuk issuers have yet to address concerns raised by the Accounting & Auditing Organisation for Islamic Financial Institutions (Aaoifi), the Gulf regulator of sharia-compliant products, that sukuk are not backed by assets, so do not comply with sharia law, says Khalid Howladar, senior credit officer for asset-backed and sukuk finance at ratings agency Moody’s Investors Service.

“The market hears what Aaoifi says, but investors want to buy unsecured credit, and that is what they are getting,” he says.

Bankers in the region expect institutions to issue more sukuk in 2010 than they did in 2009.