Contemporary Islamic Finance: Innovations, Applications and Best Practices

CHAPTER 9

Sukūk and the Islamic Capital Markets

An Introduction

MICHAEL J. T. McMILLEN^*

Partner at Curtis, Mallet-Prevost, Colt & Mosle LLP

INTRODUCTION

The history of the Islamic capital markets is a short story: complicated, but short. The conception and birth of the equity side of the Islamic capital markets is associated with the year 1998 and the issuance of a fatwā to the Dow Jones Islamic Market Indexes (the “DJIMI Fatwā”) by its Sharīah board. The DJIMI Fatwā addressed the standards that are applicable in connection with making a Sharīah-compliant equity investment. Those standards apply well beyond equity investing, including in respect of the finance side of the Islamic capital markets. The conception and birth of the finance side of the Islamic capital markets are tethered to the years 2001 to 2003 and to Sharīah Standard No. 17, Investment Sukūk (the “AAOIFI Sukūk Standard”), issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).¹

That description raises a few questions. Are the Islamic capital markets somehow different from the conventional markets? If they are distinguishable, are they symmetrical and integrated in some manner?