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Table 5.1: Components of a Comprehensive Framework for Developing Sukuk Markets
Key
components
Requirements Functions
Legal and
regulatory
framework
1. Legal
framework
 To provide certainty to market players, especially in the event of disputes, by:
Amending the relevant local law(s) to accommodate the
specificities of sukuk.
Ensuring clarity for dispute resolution, bankruptcy, and
arbitration.
Dealing with the challenges posed by civil law, as opposed to
common law in some jurisdictions.
 To adopt supporting tax laws to level the playing field between sukuk and
conventional bonds.
2. Regulations
and guidelines
 To ensure investors’ protection by:
Having a strong and single regulation to govern the debt capital
market.
Issuing specific guidelines that impose the need for disclosure,
transparency, governance, due diligence, representations.
Continuous liberalisation of policies through participation by
foreign corporations, multinational agencies and multilateral
institutions.
3. Shariah
governance
 To establish a centralized Shariah authority at country level and a robust
Shariah governance framework comprising key functions, including review
and audit, to periodically assess the Shariah compliance of any sukuk.
 To ensure end-to-end Shariah compliance of sukuk at different development
stages:
Inception and conceptualisation (structuring)
Issuance
Trading until maturity
Market and
infrastructure
development
1. Trading
platform
 To facilitate primary and secondary market trading for a more diverse
investor base. including retail.
2. Registration
and approval
process
 To expedite the issuance process by promoting process efficiency, shortening
time to market and providing certainty of product offering.
3. Active Islamic
money market
 To issue more short-term sukuk for Islamic banks to manage their liquidity
and to boost secondary trading.
4. Tax neutrality  To create a level playing field between sukuk and conventional bonds, hence
encouraging more sukuk issuance through the removal of taxes related to the
transfer of assets and withholding tax on profits.
5. Tax incentives  To motivate companies to raise funds via the debt market instead of the
equity market, and to issue more sukuk instead of conventional bonds. This
can be achieved via waivers or deductions of taxes and/or issuance costs.
6. Innovative
structures
 To cater for the needs of different market segments, i.e. government,
corporate, retail. To expand the structures which include ESG and value-based
elements.
7. Cost
competitive
ness
 To increase the attractiveness of fund-raising via sukuk based on affordable
legal fees, competitive pricing, efficient approval process.
8. Benchmark
yield curves
 To facilitate more corporate issuance with different maturities.