The Role of Sukuk in Islamic Capital Markets
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 The investment of sukuk proceeds should be for Shariah-compliant purposes and mostly
fund activities in real sectors.
 The tradability of sukuk is guided by the relevant Shariah rules, e.g. sukuk holders must
own all the rights and obligations associated with the ownership of the sukuk assets, and
sukuk must not represent receivables or debts (AAOIFI, 2015).
 The rescheduling/restructuring of sukuk may be treated differently, depending on the
type of underlying assets involved and the underlying Shariah contracts used in their
structuring.
2.1.3 THEORETICAL AND LEGAL NATURE OF SUKUK
In theory, all sukuk represent a form of equity as they epitomise certificates that confer to their
holders’ ownership of an asset or a pool of assets, and/or a claim to its/their cashflows. In
practice, sukuk are characterized according to their risk–reward structures and profiles; hence
they are divided into sale-based, lease-based, partnership-based, agency-based and hybrid
sukuk (which possess the characteristics of both debt and equity). This classification is also a
reflection of the underlying Shariah contracts used in their structuring. Moreover, not all sukuk
are asset-rooted: some are fully asset-backed, others have limited degrees of ownership while
some merely refer to a pool of reference or collateral assets. The nature and type of assets used
form the second category in sukuk classification. In addition, sukuk are known for their
technical and commercial features, based on the nature of the issuer, the tenure of the
certificates, the complexity of the structures and other features.
Sukuk, Bonds and Shares
Sukuk, bonds and shares are capital market instruments. They share some similarities and
differences with each other. Table 2.1 provides a detailed comparison between the
instruments.
Table 2.1: Comparison between Bonds, Sukuk and Shares
Bonds Sukuk Shares
Nature
Represent IOUs or
interest-bearing debt
obligations of the issuer.
Represent proportionate ownership in
Shariah-compliant assets, usufructs,
services, intangible assets,
commodities, or profit-sharing
ventures, or financial assets, or any
combination of these through a mixed
portfolio of various assets.
Represent proportionate
ownership in the
corporation.
Issuers
Issuers of conventional
bonds are not limited in
their business activities.
Any issuer that is engaged in business
activities which are permissible under
Shariah.
Any issuer.
Investors
Only non-Islamic
investors.
Islamic and non-Islamic investors. Islamic and non-Islamic
investors.
Relationship
Established
Between
Issuers and
Investors
Lending relationship
giving investors the
status of creditors.
Relationships are based on Shariah
contracts used in structuring the sukuk.
Investors are conferred
ownership rights
(become shareholders) in
the corporations issuing
the shares.