The Islamic Debt Market for Sukuk Securities

The Islamic Debt Market for Sukuk Securities

The Theory and Practice of Profit Sharing Investment

Foundations of Islamic Finance series

Edited by Mohamed Ariff, Munawar Iqbal and Shamsher Mohamad

The relatively new sukuk (or Islamic debt securities) markets have grown to more than US $800 billion over the past decade, and continue to grow at a rate of around 20-30 per cent per year. Arguably the first of its kind, this path-breaking book provides a highly unique reference tool relating to key issues surrounding sukuk markets, which are found in 12 major financial centres, including Kuala Lumpur, London and Zurich.

Chapter 14: Prospects and Challenges of Developing Sukuk Islamic Debt Markets Around the World

Mohamed Ariff, Munawar Iqbal and Shamsher Mohamed

Subjects: economics and finance, financial economics and regulation, islamic economics and finance, money and banking


Mohamed Ariff, Munawar Iqbal and Shamsher Mohamad 14.1 INTRODUCTION The sukuk securities or Islamic asset-backed debt securities truly started to be offered in organized markets as publicly listed instruments only in 2000, so at the time of writing it is a 12-year-old market. There is a record of its first private issue in 1978 in Saudi Arabia, after an article in Islamic Economic Studies some years earlier had suggested this instrument to be a suitable and safe debt instrument with safeguards for investors and being consistent with ethics long since forgotten in issuing debt instruments in past Islamic empires. It has since been widely accepted as an Islamic financial product for debt-raising with one important principle, namely asset ownership of part of the assets of a borrower which gives this instrument asset backing, a unique feature in debt markets. Historical reference to sukuk is found in the records of the Abbasid Empire established in circa 900 soon after Islam spread to the Byzantine region in what is known today as Jordan, Iraq, Palestine and Syria. The sukuk instrument has in the contemporary period become an ethics-based Islamic financial instrument already issued either as private issues or as public issues in some 12 locations as at 2010, to provide both short- and long-term funding arrangements. Four more financial centres are actively putting together reforms as at 2011 to start markets for issues of this new instrument. In terms of sukuk market size, Malaysia has particularly emerged as the major player with...

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