Financial companies are looking for alternative financing in the form of sukuk in Malaysia as the eurozone debt crisis cripples the euro bond issuance.
As a result, foreign issuance of sukuk in Malaysia is expected to increase by 25-30 percent next year owing to the global economic crisis.
Sukuk refers to the Islamic equivalent of bonds. Since fixed income and interest bearing bonds are prohibited in Islamic, sukuk securities are structured to comply with Islamic law.
Economic experts therefore say that Islamic banking is sought after now as the eurozone sovereign debt crisis deepens.
Malaysia is currently the largest issuer of sukuk as it commands about 63% or 179 billion dollars of the global sukuk market.
The country's latest two billion dollar wakala sukuk has been well received with 29% taken up by Gulf investors, 27% by Malaysians, 14% by Europeans, 22% from Asia and 8% from the US.
Economists also say that while Islamic banking might not be able to provide a complete solution to the eurozone debt crisis, it does offer a form of security.
The shariah-compliant products also offer a competitive alternative way of conducting financial transactions.
Economists say that the Malaysian government's pump priming activities would cushion the impact of tough foreign environment and also augur well not just for Islamic investment but also for the domestic economy.