Singapore property developer, City Developments Limited (CDL), signed a deal last Thursday with Malaysian financial group, CIMB in order to raise S$1 billion through the issuing of Islamic bonds.

CDL hopes to have the first tranche of the issue on the market by end of 2008 with CIMB as the lead manager for the issue. Kwek Leng Joo, managing director of CDL, said that this is the first Islamic unsecured financing transaction of its kind in Singapore.

The city-state has been attempting to grow its share of the Islamic finance market and according to Kwek, the Islamic bond offering will spur the developer’s coffers, enabling it to tap opportunities in an emerging global economic slowdown.

Islamic banking combines principles of sharia, or Islamic law, with modern banking. Islamic funds are banned from investing in companies associated with tobacco, alcohol or gambling, which are considered taboo by Muslims.

According to CIMB, the Islamic bond market is holding up despite global economic uncertainties. Figures from CIMB revealed that Malaysia has the world’s largest Islamic bond market, which accounts for about 66 per cent of total Islamic bonds issued worldwide in 2007.

Credit ratings firm, Standard and Poor’s, noted in March that the global market for sukuk (the Islamic equivalent of bonds) could top S$141.8 billion in the next few years after exceeding S$85.1 billion last year.