Islamic loans from Europe, the Middle East and Africa dropped to a five-year low with banks reluctant to lend amid concerns Europe\'s budget crisis will roil markets as Arabian Gulf borrowers restructure debts. Sharia-compliant syndicated financing in the region fell 21 per cent to $2.96 billion in 2011 from a year earlier, the least since 2006, while total lending jumped 22 per cent to $619 billion, according to data compiled by Bloomberg. Arabian Gulf companies dominated borrowing. HSBC Holdings, Saudi Arabia- based Samba Financial Group and Royal Bank of Scotland Group were among the top 31 arrangers, the data show. Islamic loan issuance has slowed every year since peaking in 2007, as the threat of sovereign defaults in Europe and the faltering global economic recovery deter lending. Many Sharia banks in the Gulf are waiting to see how restructurings and repayments pan out before freeing up capital, according to London-based investment bank Exotix and National Commercial Bank, Saudi Arabia\'s biggest lender. \"Bank lending is still treading water in much of the region,\" Jeddah-based Jarmo Kotilaine, chief economist at National Commercial Bank, said in an interview. \"There\'s this continuing sense of reserve, malaise, anxiety, apprehension, whatever you want to call it. Things haven\'t normalised.\"‘ Article continues below Saad Group and Ahmad Hamad Algosaibi & Brothers Co, both based in the Saudi Arabian oil-producing city of Al Khobar, are restructuring debt. The two companies defaulted in 2009 after borrowing a total of $15.7 billion (Dh57.6 billion) from more than 80 banks, including HSBC and Credit Agricole SA. In Kuwait, investment bank Global Investment House KSCC restructured $1.73 billion of debt in 2009, while Investment Dar Co, the owner of half of Aston Martin Lagonda Ltd, altered terms on $5 billion of loans after defaulting in 2009. Restructurings \"In the case of Islamic lenders, there are a number of Islamic debt restructurings in the region that are weighing heavily on them, including Algosaibi and Saad Group,\" Dubai- based Ahmad Alanani, head of fixed-income sales for the Middle East and North Africa at Exotix, said in an interview. \"The sense of entrenchment which prevailed amongst banks over the past two years extended with the political unrest in the Middle East.\" Civil unrest spread after Tunisia\'s president was ousted in January. Exotix said banks in the UAE are starting to lend again as their deposits rise, and Kuala Lumpur-based OCBC Al Amin Bank and Asian Finance Bank said they are seeing a pickup in loan demand. \"We have received enquiries from firms in the Arabian Gulf to arrange financing linked to development projects in Dubai and Qatar,\" Mohammad Azahari Kamil, chief executive officer at Asian Finance Bank, said in an interview. \"Loan numbers should be prettier in the second half.\" Sales of Sharia-compliant bonds, which pay returns based on assets, more than doubled this year even as Islamic loans fell. Global issuance climbed to $16.7 billion in 2011 from a year earlier, according to data compiled by Bloomberg on Islamic bonds. Offerings in the six-member GCC rose 51 per cent to $3.7 billion, the data show. Sukuk Average yields on global sukuk held at 3.39 per cent on Wednesday, the lowest level since January 2005, according to the HSBC/Nasdaq Dubai US Dollar Sukuk Index. The difference between average yields and the London interbank offered rate was little changed at 198 basis points.