CHAPTER 3 Sukuk – Unlocking the Potential for Economic Development

By Dr Sayd Farook and Redha Al Ansari

Sukuk are widely acknowledged as the posterchild of the Islamic finance industry. Their universal appeal for all types of corporates, the strong captive demand base from Islamic financial institutions and the high-profile issuances of non-Muslim sovereigns have catapulted their visibility and prominence into the big leagues of finance, despite their very modest and niche size in absolute issuance terms.

Indeed, sukuk could become a significant tool deployed by governments across the world to diversify their funding pool in order to support economic and infrastructure development, particularly in Islamic countries where economic activity is sensitive to religious values.

However, to capitalise on the transformational effects of sukuk, it is critical to appreciate their foundational principles and what makes them both distinct from, and in some ways similar instruments to, conventional bonds. This chapter provides a summary of the key characteristics of sukuk without necessarily going into the significant amount of Shari'ah and legal knowledge already available on the way a particularly issuance should be structured (see also Chapters 5 and 6 in this volume).


The sukuk industry is at the growth stage of its life-cycle and still depends heavily on government issuance to prop up markets. Corporates have recently tapped the sukuk market to ...

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