Chapter 5

An Overview of Sukuk

Learning outcomes

At the end of this chapter, you should be able to:

1 Differentiate between sukuk, bonds, and shares.

2 Identify basic contracts in sukuk structures.

3 Distinguish between the various sukuk structures.

4 Differentiate between asset-based and asset-backed sukuk.


Nowadays, the term sukuk is more widely known than it was a decade ago. Sukuk is a claim or claims that are similar to notes or certificates, such as a trust certificate.1 The Accounting and Auditing Organization for Islamic Finance (AAOIFI) defines investment sukuk as certificates of equal value representing undivided shares in ownership of tangible assets, usufruct, and services, or in the ownership of the assets of particular projects or special investment activities; however, this is true after the receipt of the value of the sukuk, the closing of the subscription, and employment of the funds received for the purpose for which the sukuk were issued. Meanwhile, the Securities Commission (SC) of Malaysia defines sukuk as certificates of equal value that represent undivided ownership or investment in the assets using Shariah principles and concepts approved by the SAC. However, unlike the conventional claim, sukuk is an ownership claim and therefore not a debt of the issuer, but rather an undivided ownership share in specific assets/projects/services.

“Sukuk” is derived from the word sakk, or which can mean legal instrument, deed, and cheque. In lisan al-Arab ...

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