The Role of Sukuk in Islamic Capital Markets
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An example that has defined the evolution of sukuk structures is the statement made by Sheikh
Taqi Usmani (chairman of the AAOIFI Shariah Board) in late 2007. He commented that most of
the sukuk in the market (specifically those under musharakah or mudarabah structures) were
not in line with the principles of Shariah. As a result, the AAOIFI Shariah Board had convened a
series of meetings in Bahrain, after which the revised AAOIFI sukuk guidelines were
announced in 2008, as depicted in Box 3.4.
Box 3.4: AAOIFI’s Pronouncement on Revised Shariah Standards on Sukuk (2008)
 First: Sukuk, to be tradable, must be owned by sukuk holders, with all the rights and obligations of
ownership in real assets, whether tangible, usufructs or services, capable of being owned and sold
legally as well as in accordance with the rules of Shariah. The manager issuing sukuk must certify the
transfer of ownership of such assets in its (sukuk) books, and must not keep them as his own assets.
 Second: Sukuk, to be tradable, must not represent receivables or debts, except in the case of a trading or
financial entity selling all its assets, or a portfolio with a standing financial obligation, in which some
debts, incidental to physical assets or usufructs, have been unintentionally included.
 Third: It is not permissible for the manager of sukuk, whether the manager acts as a mudarib
(investment manager), or sharik (partner), or wakeel (agent) for the investment, to undertake to offer
loans to sukuk holders when the actual earnings fall short of the expected earnings. It is permissible,
however, to establish a reserve account for the purpose of covering such shortfalls to the extent possible,
provided the same is mentioned in the prospectus.
 Fourth: It is not permissible for the mudarib (investment manager), sharik (partner), or wakeel (agent)
to undertake {now} to re-purchase the assets from sukuk holders or from one who holds them, for its
nominal value, when the sukuk is extinguished at the end of its maturity. It is, however, permissible to
undertake the purchase on the basis of the net value of the assets, their market value, fair value or a
price to be agreed upon, at the time of their actual purchase. It is known that a sukuk manager is a
guarantor of the capital, at its nominal value, in case of his negligent acts or omissions or non-
compliance with the investors’ conditions, whether the manager is a mudarib (investment manager),
sharik (partner) or wakeel (agent) for investments.
In case the assets of sukuk of al-musharakah, mudharabah, or wakalah for investment are of less value
than the leased assets of "lease to own" contracts (ijarah muntahia bi-tamleek), then it is permissible for
the sukuk manager to undertake to purchase those assets - at the time the sukuk is extinguished - for the
remaining rental value of the remaining assets, since it actually represents its net value.
Fifth: It is permissible for a lessee in a sukuk al-ijarah to undertake to purchase the leased assets when
the sukuk is extinguished for its nominal value, provided he (the lessee) is not also a partner, mudharib
or investment agent.
Source: AAOIFI (2008)
Efforts to promote the streamlining of processes to shorten turnaround time and the adoption
of a harmonized global approach to Shariah compliance will necessitate progression in
building the next phase of growth for the sukuk market.