LONDON, (Reuters) – Issuance of Islamic bonds or sukuk fell by more than 50 percent in 2008, due to the credit crisis and the debate over their compliance to Islamic laws, said rating agency Moody’s on Thursday.

In a report, the agency said the sukuk industry and Islamic finance in general had faced “unprecedented challenges” last year.

“The Gulf Cooperation Council (GCC) and Malaysia were hardest hit, with Sukuk issuance declining by 55 percent and 59 percent, respectively,” said Faisal Hijazi, Moody’s business development manager for Islamic Finance and author of the report.

Moody’s assessment of the sukuk market coincided with a study published by rating agency S&P earlier this month, which said the value of sukuk issued in 2008 dropped by more than 56 percent compared with 2007 to $14.9 billion.

The Sukuk market reached $111.9 billion in the eight years to 2008 estimated the International Islamic Financial Market, a body founded by central banks and monetary agencies of Bahrain, Brunei, Indonesia, Malaysia, Sudan and the Islamic Development Bank based in Saudi Arabia.