The Indian state of Kerala plans on selling the nation’s first Islamic bonds, or sukuk, in 2010 to raise capital for infrastructural projects, reports Bloomberg.

“The way we see it it’s another form of venture capital,” Finance Minister Thomas Isaac said in an interview in Thiruvananthapuram, the southern state’s main city. “We need long-gestation funds to build airports, high-speed trains and expressways. Islamic finance promises unexplored potential in that context.”

The state, which relies heavily on remittances from the Middle East, is helping to set up Al-Barakah Financial Services Ltd. to sell the bonds, Isaac added. The fund will target Indian Muslims living and working in the Gulf.

“India, if opened up for Islamic banking, is the big prize,” Afaq Khan, Dubai-based Chief Executive Officer of Standard Chartered Plc’s Islamic banking unit, told Bloomberg in a telephone interview. “Its large Muslim population and strong growth promise excellent opportunities for releasing a lot of funds into the documented economy.”