ISLAMIC BONDS (SUKUK)

Islamic bonds (Sukuk)

Islamic bonds (Sukuk)

Financial transactions in Islam

Islamic finance is growing on a very good pace. Since last thirty years, the quantity of Islamic financial institutions has grown from being only number 1 in 1975 to three hundred in around 75 countries these days. It established in the most important part of the continent that included Middle East and Southeast Asia where Malaysia and Bahrain were considered the major centres for Islamic Finance and is also growing very well in Europe and USA. It is estimated that its total worldwide assets are exceeding U.S. $ 250,000 million and has a growth of fifteen percent per year although the financial data which is available is very limited. There are products related to Islamic Finance which are prepared to attract businessman who regularly follows Islamic law (Sharia) that governs the daily life of Muslims. (Ahmed, 1989, pp.157-167)

Its rules strictly prohibits paying or receiving interest and it is considered immoral to profit from the exchange of money for money, which makes it very clear that every transaction related to finance must be based on the authentic economic activity, and investing in unlawful and criminal activities such as in wine, casinos and in the guns or rifles is even prohibited. There are various Islamic financial organizations that deal with a wide range of financial services such as fund raising, allocation of asset, services related to payment and operations of exchange plus processing and mitigation of risk but these well-established financial intermediaries performing operations uses various financial tools that obey the principles of Sharia. (Gamal, 2006, pp.78-101)

There are some reasons for the growth in Islamic Finance in recent times. One of the main reasons is the strong demand from many Muslims for services and financial transactions that comply with the Sharia law. Another factor is the growing wealth and petroleum in the Gulf area, which causes a spike in demand for suitable investments and third is the competitiveness of many products that attract foreign businessman but in spite of its huge growth, Islamic Finance is still not very vast in most of the countries and minuscule in connection to the financial system based on the capitalist system. In order to have a much stronger role especially in the Arab market, there is a need for the various representatives to face difficult challenges in the correct order. Till today's date, there has not been any major financial crisis with the Islamic system. However, it is very vital to increase the confidence level of those investors who have a keen interest in establishing financial sector based on Islamic principles. There is no doubt that receiving and paying interest is strictly prohibited according to Islamic Law. However it does not mean that those investors who are unable to earn money or receive return on investments rely on economy that is influenced by cash or barter. (S. A., 2005, pp.19-40)

Characteristics of Islamic Bond (Sukuk)

Sukuk is a certified financial statement which is technically ...