The Role of Sukuk in Islamic Capital Markets
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The IFA-OIC’s resolution on muqaradah sukuk had come after the Ministry of Awqaf, Islamic
Affairs and Holy Places in Jordan initiated the process of issuing such sukuk in 1977. The
Government of Jordan had been looking for Shariah-compliant financing for the renovation of
waqf properties and had sought to use the revenue generated by specific projects to back the
sukuk issuance. To initiate the process, it had promulgated the Muqaradah Bonds Act, which
came into effect in 1981.
Besides Jordan, several attempts were made by other countries to issue sukuk before 1990,
notably Pakistan, Malaysia and Turkey. These issuances were, however, short-lived (except for
Malaysian government issuances) due to the prevailing conditions at that time in those
countries.
The sukuk market underwent a nascent stage in 1990-2000. RAM (2013) identified this period
as the awareness-building phase by stakeholders, including potential issuers and investors. In
Malaysia, much attention had been given at that time to the introduction of the sukuk market,
the players, the concepts, the mechanisms and the structures of sukuk.
The sukuk market marks its actual emergence from 2001. There has been an increased
number of sukuk issues amid significant market growth. Sukuk has also evolved as a financial
instrument in terms of the various types of Shariah contracts used in its structuring, the
underlying assets backing the issuance, the types of sukuk issued and developments in terms
of players, investors, markets and infrastructures, among others. Figure 2.1 summarizes these
main phases of sukuk development.