The Sukuk’s phenomenon is spreading its wings westward - It is a known fact that 2006 has been a watershed year for the growth of the Sukuk market and that it has witnessed, at the very end of the year, the largest Sukuk ever issued. But 2007 promises to be an even bigger bumper year. All the data available suggest, in fact, that the 2007 forecast of US$20 billion mark shall be exceeded mainly thanks to the role that non-Muslim countries will possibly play.

One of the most compelling events is, indeed, represented by the fact the international conventional debt markets are starting to take the Sukuk seriously both as an alternative instrument to raise funding and as a cost effective way to refinance existing conventional debt. In other words, Sukuk and Islamic finance, that until recently were a specialist niche of international banking limited to Muslim countries and primarily focused on the retail sector is expanding very rapidly the world over. A recent survey made by the author of this article in a major European country shows that more and more non-Islamic companies and institutions are starting to consider raising funds via Islamic routes a viable alternative.

The following tales highlight the dramatic momentum building up in non-Islamic countries for the Sukuk instruments.

A first important development has been the issue of the first US-Sukuk ever in 2006. East Cameron Partners, an independent oil and gas exploration and production company based in Texas , has issued a Musharaka Sukuk that involves the securitization of hydrocarbon sales. This very complex transaction is one of the most innovative and interesting Sukuk to have been issued in the recent past and shows many features that have attracted the attention worldwide. Among them, the fact that it has been the first issue to come from a USA-based entity, the first such issue to be rated by Standard & Poor’s and the first securitization that has embedded Shari’ah compliant hedges.

A second significant development has been the step taken in February of this year by the English government towards the establishment of the world's first secondary market for trading Sukuk. The UK has in fact announced plans to introduce legislation to allow issuers of Sukuk to offset the coupon payments they pay to investors against company profits for tax. Before that an issuer of a conventional bond could offset the coupon interest payment against profits, but an issuer of a Sukuk did not qualify for this relief as the coupon payment is based on profit rather than interest and profit could not be offset against profit.

In the third place is to be noted that Japan, one of the largest world economy, is preparing to launch a debut benchmark sovereign Sukuk and that, according to recent rumors in the market, Italy, one of the G7 countries, will be home of a Sukuk issue in the very near future.

Last but not least, at the retail level non-Muslim investors scramble to purchase Sukuk issues, that are routinely many times oversubscribed, with the hedge fund playing a key role. This has happened, for instance, when UBS has sold a Sukuk for Khazanah National Berhad , the Malaysian government's investment arm, and has happened again with the Nakheel issues that has been 70% subscribed by western entities.

With this exciting background in mind more than 200 key banks, issuers and ratings agencies from all over the world involved in the Sukuk market will gather for the first time in Dubai on April 25 in an event hosted by the Middle East Business Forum. This event, that looks to be the key bookmark for the Sukuk markets in 2007, will focuses on the innovations needed to fully exploit the global capital markets. In particular, it will explore the ways to add to sovereign and corporate issues, dedicated Sukuk issues that bring capital where is most needed to develop basic infrastructure, to better people’s life and to contribute to a wide-spread yet sustainable development. Its constructive and innovative debate will addressed all major practical questions and regulative concerns and will also explore the role that Sukuk can play in the western Corporate Social Responsibility arena. Some final recommendations for its innovation and development will also be made.