Financial Sukuk: Concept, Legal Principles, and Types

Abstract

Sukuk, often referred to as Islamic bonds, represent a unique and innovative financial instrument within the realm of Islamic finance. Originating from the principles of Shariah law, Sukuk offer a distinct alternative to conventional bonds by adhering to Islamic principles that prohibit the payment or receipt of interest (Riba). Instead of interest-bearing debt, Sukuk are structured as investment certificates, granting investors a share in the ownership of tangible assets or services. This adherence to Shariah principles ensures that Sukuk are compatible with Islamic ethical and legal standards, attracting a diverse range of investors seeking financial instruments aligned with their religious beliefs. As Sukuk continue to gain prominence in global financial markets, they contribute to the development of more inclusive and diverse investment options, catering to both Islamic and non-Islamic investors alike. This research paper presents a thorough literature review of Sukuk in the Islamic economy and showcases their definition, typologies and other aspects. Sukuk, often referred to as Islamic bonds, play a significant role in the Islamic economy. These financial instruments comply with Islamic law (Shariah) principles, which prohibit the payment or receipt of interest (Riba) and promote risk-sharing and asset backing. Sukuk provide an alternative means for raising capital that aligns with Islamic finance principles. The study herein is of significance for researcher as well as postgraduate researchers in the areas of Islamic banking, economy studies and accounting.