Sukuk commonly refers to the Islamic equivalent of bonds. However, as opposed to conventional bonds, which merely confer ownership of a debt, Sukuk grants the investor a share of an asset, along with the commensurate cash flows and risk. As such, Sukuk securities adhere to Islamic laws sometimes referred to as Sharia principles, which prohibit the charging or payment of interest.

The emergence of Sukuk has been one of the most significant developments in Islamic capital markets in recent years. They link their issuers, primarily sovereigns and corporations in the Middle East and Southeast Asia, with a wide pool of investors, many of whom are seeking to diversify their holdings beyond traditional asset classes. In this way, funds raised through Sukuk can be allocated in an efficient and transparent way to infrastructure initiatives and other deserving projects.

Both domestic and foreign investors buy Sukuk having various structures approved by Sharia boards of Islamic scholars.

Sukuk issuance has proven its resilience during recent periods of turbulence in global capital markets. Sukuk issuance increased from US$ 14.9 billion in 2008 to US$ 23.3 billion in 2009, with Asia showing particular strength. Even so, the Sukuk market is still a niche one, with huge potential for growth. The Sukuk growth rate is currently 10-15% in global financial markets.

Sukuk Vs. Other Investments

Typical Sukuk Structure