Sukuk

Sukuk (often called "Islamic bonds") are financial certificates that represent proportional ownership in tangible assets, usufruct, services, or projects, structured to comply with Islamic law (Shariah). Unlike conventional bonds that represent debt and pay interest (Riba), which is strictly prohibited in Islam, Sukuk provide returns generated from underlying tangible assets or business activities. Sukuk holders own undivided shares in the underlying assets and are entitled to a share of the profits generated, while also bearing proportional risk of loss. The modern Sukuk market emerged in the 1990s as Islamic finance institutions sought Shariah-compliant alternatives for raising capital. Major types include Sukuk al-Ijarah (based on lease agreements), Sukuk al-Musharakah (partnership-based), Sukuk al-Mudarabah (profit-sharing), and Sukuk al-Wakalah (agency-based). Sukuk must be backed by real assets, avoid uncertainty (Gharar), and ensure that transactions represent genuine trade rather than disguised lending. They have become essential instruments for sovereign and corporate financing in Muslim-majority countries and beyond, with Malaysia, Saudi Arabia, UAE, and Indonesia being major issuers. The global Sukuk market has grown exponentially, reaching hundreds of billions of dollars, and attracting non-Muslim investors seeking ethical, asset-backed investments. Sukuk exemplify how Islamic finance provides viable alternatives to conventional financial instruments while adhering to religious principles and promoting real economic activity.