The global demand for Islamic bonds or Sukuk will grow three-fold from the current 300 billion US dollars to 900 billion US dollars by 2017, global consultancy Ernst and Young forecasted in a study published on Saturday.

"Sukuk continues to be in the spotlight, especially after the global economic meltdown, where we learnt that carrying excessively risky debt on the books can lead to financial collapse during black swan events," said Ashar Nazim, MENA Islamic Finance Services Leader at Ernst and Young in Dubai.

Nazim, however, doubts that the market will be ready in five years to satisfy the market demand for 900 billion US dollars of Sukuk.

In the wake of the global financial crisis, which nearly led to a near-default of a 3.52 billion US dollars-Sukuk of a state- owned developer in Dubai, the issuance of Sukuk tumbled in 2010, but massively bounced back earlier this year.

According to Kuwait's largest Islamic bank Kuwait Finance House, Sukuk worth 66.4 billion US dollars were issued in the first half of 2012, representing a 40.1 percent increase over the same period last year. In addition, the yield for Sukuk listed at the NASDAQ Dubai hit a new record-low last week. Sukuk with a total nominal value of 7.1 billion US dollars are listed the NASDAQ Dubai, which means the bourse is the largest secondary market for Islamic bonds in the region.

However, the yield based on the HSBC/NASDAQ Dubai US Dollar Sukuk Index lies still 199 basis points above the London-based inter-banking rate LIBOR, meaning there is still room for better valuations of Islamic bonds compared to conventional bonds.

"This is the biggest year for Sukuk simply because supply is finally catching up to demand," said John Sandwick in an interview with Xinhua, wealth manager at Safa Investment Services in Geneva, Switzerland, adding that "2013 we expect issuances to be even bigger.The Sukuk market is finally hitting its stride since substantial standardization by Islamic finance organizations such as AAOIFI, the Accounting and Auditing Organisation for Islamic Financial Institutions."

Whilst Nazim admitted that there is a progress in standardization on national and regional bases, adding that "an absence of a global standardized Sukuk trading platform open for all Islamic and conventional financial institutions is a major factor hindering growth."

"Sukuk securities must be backed by real assets and projects," Nazim explained, saying that a fact which fuels growth because conventional bonds solely based on cash flows appear to be riskier than Sukuk to more and more investors.

Nazim added that "Major South East Asian and Middle Eastern companies are tapping into the international Sukuk market to raise Shari'a compliant funds. Global financial firms are also in the fray to raise money through Sukuk instruments and to offer Shari's compliant products."

70 percent of global Sukuk issuances and Sukuk listed come from Malaysia, followed by the United Arab Emirates and Saudi Arabia, which both stand for around percent of the market.

The lack of know-how and standardization is a hindrance and chance for the financial industry likewise. "There is an urgent need for a new direction in the market to be led by leading Islamic financial institutions and multilateral institutions in a collaborative manner," Nazim said, adding that "Globally, at least 14 Islamic banks today have the financial muscles to venture into international sukuk capital market. Prerequisites are international connectivity, Sukuk structuring and trading expertise and balance sheet strength."