According to Badlisyah Abdul Ghani, head of the Malaysian bank CIMB Islamic, the idea behind the venture is to allow poorer nations within the IDB's 55 country membership to tap into the bond market.

"It is basically to have some Islamic countries that have assets, put together under one special purpose vehicle (SPV), jointly with other Islamic countries that do not have the necessary assets or credit profile to tap the bond market, to come together and issue the paper," he explained in an interview with Bernama, the Malaysian National News Agency.

Badlisyah added that the roadshow has just concluded and will be finalised soon.

Sukuks, bonds which are compliant with the principles of Shariah law, are becoming an increasingly visible feature of the international investment environment. These certificates bear a resemblance to conventional bonds, but unlike their western counterparts, they are backed by an asset, such as pools of ijara contracts, which are a kind of leasing contract. The asset will be leased to the client to yield the return on the sukuk, and backing by real assets ensures that a sukuk is also tradable in a Shariah-compliant secondary market.

A substantial market is developing in both sovereign and corporate sukuks and some US$30 billion worth of certificates have been issued to date.

Market capitalisation of the LFX, which was launched in October 2000, reached US$11.5 billion last month with the listing of US$80 million Guaranteed Redeemable Convertible Bonds by the Transmile Group Berhad (TGB).

The LFX is an offshore exchange wholly owned by the Kuala Lumpur Stock Exchange and trades in financial instruments such as equities, investment funds, debt instruments and insurance-related instruments. At present, there are 19 conventional bonds, 5 mutual funds and 5 sukuks listed on the exchange.