Understanding Sukuk in Islamic Trade Finance

2A. The Sukuk Dilemma: Has 'Asset-Backed' Become 'Asset-Based' Fiction? Sukuk (Islamic bonds) were hailed as a revolutionary tool for project finance. However, many modern Sukuk have devolved into legal constructs that mimic conventional bonds, raising serious questions about their authenticity. The Critical Distinction: Asset-Backed Sukuk: Investors truly own an undivided share of a tangible asset and its cash flows. They bear the risk of the asset's performance. This is the ideal. Asset-Based Sukuk (The Common Model): The asset is often a legal placeholder—a piece of land or a portfolio of existing debts. A sale/leaseback structure is used primarily to create a fixed, periodic 'rental' payment. Crucially, the Sukuk often includes a purchase undertaking from the issuer, guaranteeing the return of the principal at maturity. This effectively removes the asset risk from the investor, reducing the Sukuk to a debt instrument with an Islamic veneer. The Result: Investors get a fixed, bond-like return without genuine ownership risk. The form of asset ownership is met, but the substance of risk-sharing is eliminated. This 'Sukukisation' of debt undermines the very risk-sharing principle Sukuk were meant to promote. #Sukuk #IslamicBonds #StructuredFinance #Securitisation #Investment

Hong Kong is on track to develop as an Islamic finance centre in North Asia, with some companies considering issuing sukuk bonds to help Middle Eastern capital flow into the Greater Bay Area, according to bankers and the city’s financial secretary. https://lnkd.in/dTzZktNx

15 October 2025 - We bring you the latest news related to Malaysia's Bond & Sukuk. Let's take a look at today's highlights: • Budget 2026 will be positive for government bonds, says DBS • RAM Group (RAM Ratings) affirms rating of Glacier Assets’ water receivables-backed Senior Notes • 10-year Treasury yield briefly falls below 4% as investors buy bonds for a trade war safe haven Head on to www.bixmalaysia.com for more info. #malaysiabond #malaysiasukuk #bond #sukuk #fixedincome #News #Newsupdate #BIXMalaysia #BIX #investing

🌍 Islamic Finance in the Caribbean – Post 4 With the TTSE Capital Markets Conference approaching this Friday, I’d like to highlight a capital market instrument that’s unique to the Islamic finance industry — Sukuk. Sukuk is often described as the Islamic alternative to bonds — but in truth, it goes much deeper. 💡 What is Sukuk? Sukuk are typically issued through a Special Purpose Vehicle (SPV) in which investors purchase shares. A defining feature is that Sukuk holders have a right to the cash flows of an underlying asset, rather than earning interest. These cash flows can take many forms — the most common being income from leased assets. 🌐 Global Relevance Sukuk are listed on major exchanges around the world, including Nasdaq Dubai, the London Stock Exchange, Euronext, the Luxembourg Stock Exchange, the Johannesburg Stock Exchange, the Nigerian Exchange, and others. ✅ Key Advantage: Because they are asset-backed, Sukuk can help issuers secure funding at lower costs and, in many cases, are not treated as debt — improving the issuer’s overall debt profile. 📈 Why It Matters for the Caribbean Imagine the impact for Caribbean governments grappling with high debt levels — Sukuk could offer a new avenue for sustainable and ethical financing, attracting a broader investor base while supporting real economic growth. 🔑 Takeaway: Sukuk could play a transformative role in developing resilient and sustainable capital markets across the Caribbean. 👉 What are your thoughts? Could Sukuk be the key to redefining how we finance development in our region? 📌 Part of a weekly series on Islamic Finance in the Caribbean. Stay tuned for Post 5 next week, ان شاء الله! 📍 P.S. I’ll be attending the TTSE Capital Markets Conference this Friday, ان شاء الله. I’d be happy to connect and discuss further! 😊 #IslamicFinanceInTheCaribbean #IslamicFinance #Sukuk #EthicalFinance #SustainableFinance #Caribbean #CapitalMarkets #Finance

🌙 From Curiosity to Clarity: My Discovery of Sukuk Bonds While studying the Fixed Income topic for my CFA Level 1, I stumbled upon something fascinating — “Sukuk Bonds.” At first, I wondered, “Can someone really be a co-owner of an asset while holding a bond?” That thought stopped me right there — and it opened a door to a whole new perspective on Islamic finance. Unlike conventional bonds, Sukuk doesn’t represent debt or interest payments. Instead, it signifies shared ownership in a tangible asset or project — where investors earn profits, not interest (riba). The beauty? It’s a financial instrument that’s both ethically grounded and economically empowering — aligning perfectly with Shariah principles. 💡 Why Sukuk Matters: ✅ Halal & Ethical – Free from riba and uncertainty. ✅ Asset-Backed – Real investments, not speculative debt. ✅ Shared Risk, Shared Reward – Promotes fairness and transparency. ✅ Supports Real Economy – Funds flow into productive ventures. ✅ Global Growth – The Sukuk market has already surpassed $800 billion+ worldwide. In a world often driven by interest and debt, Sukuk stands as a reminder that prosperity can be achieved without compromising faith or ethics. 📈 For me, discovering Sukuk wasn’t just part of my CFA syllabus — it was a moment of connection between finance and faith. 💬 I’d love to know — Have you ever explored Islamic finance instruments like Sukuk? Let’s spread awareness of these ethical alternatives that empower both our souls and our portfolios. 🤲 #Sukuk #IslamicFinance #CFAJourney #EthicalInvesting #FaithAndFinance #FixedIncome #Likedin #Entrepreneurship #growth #innovation #Finance #accounting #MBA

Islamic Finance Insights - 274 Beyond Conventional Labels Funds come in many shapes. Be it equity, fixed income, money market; each tailored to investor needs. Islamic fund structures replicate this diversity but under Shariah guidance, ensuring no exposure to riba, gharar, or haram industries. This means investors don’t compromise choice; they simply elevate it with ethics. A portfolio is only as clean as the values it carries.

ICMA - International Capital Market Association is pleased to support the upcoming FT Live event in partnership with the Islamic Development Bank (IsDB) at The Biltmore Mayfair, London on 21 October which will convene investors, issuers, and senior financial industry leaders to examine the future of the Sukuk market. The discussions will spotlight key developments, challenges, and opportunities shaping this evolving asset class, offering fresh perspectives and actionable insights into its role in global capital flows. Representing a $1 trillion market as of May 2025, Sukuk is increasingly emerging as a global asset class. Long established as a cornerstone of Islamic finance, it is now gaining wider recognition as a valuable tool for portfolio diversification. Yet, while issuance remains strong in the Gulf, Malaysia, Indonesia, and Pakistan, questions persist around how far Sukuk can extend its global reach and attract deeper participation from conventional investors. For Sovereigns, Supranationals, and Agencies (SSAs), Sukuk offers an Islamic finance avenue to fund infrastructure as well as resilient social and sustainable development. However, challenges remain: legal complexity, evolving regulation, and limited investor familiarity continue to hinder broader adoption. The key question for issuers and investors alike is how to unlock Sukuk’s full potential — bridging Islamic finance with global debt capital markets. To apply to attend: https://lnkd.in/eB5ABxwk

Sukuk as an alternative to Bonds in Islamic Finance Conventional bonds are debt instruments. When you buy a bond, you are essentially lending money to a government or company in return for: • A fixed interest rate (ribā), regardless of performance. • Guaranteed repayment of principal at maturity. In Islam, this is haram because: • Ribā (interest) is explicitly prohibited in the Qur’an (2:275, 2:279). • There’s no risk-sharing — the lender profits without exposure to asset performance. Sukuk (plural of sakk) are Shariah-compliant investment certificates that replace interest with asset-backed returns. Instead of being a creditor, you are an owner/shareholder in an underlying project, service, or asset. 👉 In simple terms: • Bond = Debt contract. • Sukuk = Ownership certificate. Why Sukuk Are Better for Islamic Finance • ✅ No ribā → profits come from real trade, rent, or services. • ✅ Risk-sharing → aligns with Qur’anic principle: “You shall not wrong one another, nor shall you be wronged.” (2:279). • ✅ Asset-backed → creates real economic activity, not speculative debt. • ✅ Ethical & Transparent → avoids financing haram industries (alcohol, gambling, etc.). Sukuk are not just a “halal version” of bonds — they are fundamentally different. While bonds are loans with guaranteed interest, Sukuk are certificates of ownership in real assets, where profits depend on asset performance. This makes Sukuk a true Shariah-compliant alternative to bonds, supporting both ethical investing and real economic growth. #Finhalalinsight #Islamiccapitalmarket #finance #sukuk #halalinvestmenttips #halal #islamicfinance #islamicfintech

Shariah compliant financing is becoming an increasingly hot topic, not just regionally, but globally. Kingsbury & Partners, together with Kristina Nikolendzic from ISP Group have been providing solutions for both issuers and allocators to ensure compliance with Shariah principals, using AMCs underpinned by Murabaha Contracts with a dedicated Shariah Board. We discuss the benefits and use cases in our co-written article available here: https://lnkd.in/eKbjHSyF

Interesting article from our partner Kingsbury & Partners, highlighting the evolving needs and solutions for Shariah capital market structuring. To discuss the topic in more detail, free reach out to Kristina Nikolendzic, head of ISP Dubai.