The G20 group of major nations has included discussion of Islamic bonds as an infrastructure financing tool in its annual agenda, a move that could potentially spur the use of project-based sukuk.

Developing countries spend about $1 trillion a year on infrastructure and an additional $1-1.5 trillion will be needed through 2020 in areas such as water, power and transportation projects, according to the World Bank.

That need could be filled in part by sukuk, which are gaining prominence beyond the industry's core markets of the Middle East and southeast Asia; Britain and Hong Kong made debut sukuk issues last year.

Several Muslim-majority countries now have important economic policy positions at the G20. Turkey holds the group's presidency this year, Indonesia co-chairs the G20 investment and infrastructure working group, and Malaysia is a guest representing the ASEAN group of countries.

A meeting of G20 ministers and central bank governors last month discussed ways for sukuk to be used more widely as a financing tool, Turkey's Deputy Prime Minister Ali Babacan told a press briefing in Istanbul.

"We also had an extensive discussion on equity-based financing, asset-based instruments like sukuk," he added.

The G20 has called on regulators to study ways to include sukuk in their monetary policy frameworks and for the International Monetary Fund to include sukuk in an upcoming paper on asset-based financing.

"This could be good news for the sukuk market," said Paris-based Mohamed Damak, global head of Islamic finance at credit rating agency Standard & Poor's.

"Indeed, if the IMF findings show that this is a suitable instrument for the financing of infrastructure, it could attract additional interest from a larger group of countries, both traditional and non-traditional issuers of sukuk."

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The asset-backed nature of Islamic finance makes sukuk ideal for infrastructure financing in some ways, but until now the sector has been confined mostly to handling mid-sized deals with shorter tenors.

Traditionally, conventional bonds, often designed and marketed by Western banks, have been the default option for infrastructure-related debt deals. The balance sheets of Islamic banks have generally been too small to cope with very large sukuk issues with long tenors.

So far, the lion's share of Islamic infrastructure financing has been handled by the Jeddah-based Islamic Development Bank, a multilateral body which represents 56 Muslim countries.

However, a growing and much deeper pool of capital is in the hand of private-sector Islamic investors, and the IDB is trying along with the G20 to help unlock such capital.

Last week, the IDB said it would coordinate with Turkey, Indonesia and Saudi Arabia, another G20 member, to give greater prominence to Islamic finance during the G2's discussions.

The IDB is also drafting a cooperation agreement with the IMF, aiming to provide technical assistance to countries that want to develop Islamic financial services.

Sukuk may be discussed in the context of the new China-backed Asian Infrastructure Investment Bank (AIIB).

"We are in the middle of proposing it for the G20. For AIIB, although the discussion has not reached that yet, basically we will push for it," said Andin Hadiyanto, an Indonesian assistant finance minister.

The AIIB has yet to start operating, but it is designed to cater to Asia's growing appetite for infrastructure. Besides the three Muslim-majority G20 members and Malaysia, the AIIB counts other Muslim countries such as Kazakhstan, Pakistan, Qatar, Jordan and Oman as founding members. All have issued or have plans to issue sovereign sukuk.