Diversification of Islamic Financial Instruments
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The appeal of the Sukuk and the structure of the Sukuk to be followed are variable and highly
customizable according to multiple factors, as the availability of the underlying asset, the
preference of payment plans, and the ownership risk of the parties, pricing etc.
In cases where the underlying asset exists, the Sukuk can be structured using an Ijarah,
Murabahah, BBA or even a Mudarabah/Musharakah contract, while Istisna and Salam can’t be
used as those are to build or to crop contracts in nature. While the preference of payment plan
of the parties matters a lot, as structures using Mudarabah/Musharakah offer more flexibility
in deciding how the repayments can be made. At the same time, which party is willing to take
on the ownership risk of the underlying asset can change the choice and preference as well.
While the Murabahah Sukuk transfers the ownership to the Purchaser of the asset
immediately, Ijarah Sukuk holds the ownership risk with the financier of the asset. While there
is risk associated with the ownership preference, it also provides ownership claims which may
allow the financiers of the asset more security. Pricing of the Sukuk contributes towards the
use of underlying contract. Murabahah, Salam, Istisna, provide a predetermined pricing to a
Sukuk, as legally their pricing cannot be modified once the contract has been signed.
Mudarabah and Musharakah contracts are variable pricing in nature as they are profit sharing
contracts, while Ijarah Sukuk can fall under both categories.
Some of the current trends in Sukuks are:
 The growth of Sukuk issuances catapulted to mainstream attraction post 2005 as the
oil prices increased globally and demand for Sukuk increased since most Islamic
financial jurisdictions were flush with cash.
 The Sukuk issuances nearly doubled in 2006 from the preceding year’s total of $11.3
billion to $20.4 billion and the trend continued in 2007 when the Sukuk issuances
stood at $37.6 billion globally.
 The financial crises of 2007-08 took its toll on the Sukuk market as well as the Sukuk
issuances declined to $20.9 billion in 2008 and slowly recovered to $34.3 billion
 The recovery of the Sukuk markets was dramatic post that and it surpassed $50 billion
mark in 2010 for the first time. This was on the back of booming Islamic banking
business and a huge demand from investors for placing their investments Shariah
compliant way.
 The quantitative easing of 2012 globally catapulted Sukuk markets to a global level
and it became a financing vehicle for Islamic and conventional issuers from all over the
world, reaching the $137.1 billion in new Sukuk issuances breaching the $100 billion-
mark first time.
 Sukuk issuance decreased slightly to $116.93 billion in 2013 and to $101.7 billion in
2014. Although the $ value of Sukuk issuances declined slightly in these years the
number of issuances had increased to 834 in 2013 as compared to 763 in 2012. One of
the reasons was the diversification to non-traditional markets
 2014 is probably one of the more prominent years for global acceptance as several
non-Muslim countries issued their debut Sukuk, including Hong Kong, Luxembourg,
South Africa, Senegal, and the United Kingdom. Not only did non-Muslim Sovereigns