Sukuk (Islamic Bonds/Certificates)

Executive Summary

Financial markets today are highly competitive and involve wide range of financial instruments pertinent to variety of investors and financers. Islamic finance is one of the most developing and leading market of financial industry that offers wide range of Islamic finance products. Sukuk is among one of these leading Islamic instrument that comprises of various Sukuk types and structure, which are basically interest-bearing bonds or certificates that associate no interest but a fixed predetermined rate and a promise by issuer to buy back the bond. Currently Sukuk holds a significant place is Islamic finance industry as they offer a fresh source of funds, mostly at prominent rates, and also offers a deeper liquidity growth of the Islamic capital market. In addition, the Sukuk market is on maturing stage right now and there is a rising momentum due to the high interest of investors as well as issuers. As Sukuk is on rising trend in the financial market and associate various advantages, this report provides a detail view of sukuk including its types, structures, defaults, significance, and other aspects. Sukuk (Islamic Bonds/Certificates)

Introduction

In today's highly competitive and rapidly developing business world, several new markets have been emerging. Among them “Islamic Finance” is one of the most growing and developing financial market in almost all the leading countries across the globe. The emergence of Islamic finance with this rapid pace in international financial landscape holds an immense importance since it involve growing globalization that takes two key forms: rising interest in Islamic finance in the leading conventional markets of the world and escalating integration of Islamic finance with the conventional financial markets internationally (Jaffer, 2011). Hence Islamic finance is currently among the rapidly developing and growing financial industry that offers wide range of Islamic financial products, including “Sukuk”. High prevalence and high profile development of Sukuk in the Islamic finance market in current times has made the word, 'Sukuk”, synonymous with the Islamic capital markets (DIFC, 2009).

Sukuk provides the Shari'a compliant option to interest bearing investment certificates as well as fixed income securities, which has resulted in referring this product as the 'Islamic Bonds' due to its capability of offering Islamic investors a way to subscribe the certificates that offers a right to receive a share of profits produced by an underlying asset base and that associates the ability of being traded in the secondary financial market (DIFC, 2009). Thus, Sukuk is one of the most significant and growing Islamic bonds/certificates in current Islamic financial industry. This paper is all about Sukuk, since it is one of the most important Islamic finance products that the investors must be aware of, and thereby this report provides a complete illustration of Sukuk including its origin, concept, types, structures, defaults, and significance.

Literature Review

Sukuk is the name of financial certificate offered by Islamic banks/institutions that plays same role as of bond but associates no interest, instead it is rented to the issuer for a prearranged rental fee while the issuer ...