LONDON, Jan 29: A memorandum of understanding to develop best practice for the rapidly burgeoning Islamic bond market will be signed in London on Tuesday, banking sources said on Monday.

The International Capital Market Association and the International Islamic Financial Market are to sign the agreement to develop standard practices in the Islamic finance marketplace and broaden its appeal to both Muslim and non-Muslim investors.

The financial industry estimates roughly $17 billion worth of Islamic compliant bonds were sold in 2006.

"IIFM and ICMA are signing a memorandum of understanding to formalise cooperation between the two associations for developing the international sukuk market," said one source familiar with the details."

The MoU is to facilitate joint work in development of the international Islamic finance markets, specifically the sukuk.

Under the terms of the MoU, ICMA and IIFM will develop best practices and high common standards," the source said. A second source described the contents of the statement in similar terms.

An ICMA official confirmed there would be a signing of an agreement at the Euromoney Islamic Finance conference in London.

IIFM was founded in 2002 by the central banks and monetary agencies of Bahrain, Brunei, Indonesia, Malaysia, Sudan and the Islamic Development Bank based in Saudi Arabia to develop Islamic financial instruments and secondary markets.

ICMA is a self-regulatory organisation and trade association for the international capital markets.—Reuters