In brief
Sukuk are certificates representing an undivided share in real assets (buildings, equipment, usufructs, projects) that entitle the holder to their income. Unlike bonds, which are prohibited, neither the capital nor a return is guaranteed by the issuer (International Islamic Fiqh Academy, resolution 178, 2009).
Bonds and sukuk
A bond is a loan: the issuer must repay the capital and pay interest. The International Islamic Fiqh Academy prohibits issuing, buying or selling them, including zero-coupon bonds and prize bonds (resolution 60 (11/6), 1990).
A sukuk, on the other hand, represents ownership: a share in a leased building, or in a project run as a mudarabah or musharakah. The holder receives the actual rent or profits and bears the risks of those assets.
The Academy’s rules
In its resolution 178 (4/19) (Sharjah, April 2009), the Academy set out the characteristics of a sukuk:
- it represents an undivided share in real property;
- it is issued on the basis of a lawful contract whose rules it follows;
- the manager does not guarantee the capital, except in the event of misconduct;
- holders share profits in percentages and losses according to their share;
- it cannot be redeemed at its original value on a guaranteed basis: redemption takes place at market value or at the value agreed at the time of redemption;
- its trading follows the nature of the assets: sukuk that represent nothing but debts may only be sold at their face value.
Ijarah sukuk were dealt with in resolution 137 (3/15), and mudarabah certificates in resolution 30 (5/4).
Criticisms
In 2007, Justice Muhammad Taqi Usmani, then chairman of the AAOIFI Shariah board, took the view that most of the sukuk issued at the time did not comply with these rules, particularly because of undertakings to buy them back at their original value. AAOIFI subsequently clarified its standards (2008). Even today, some “asset-based” sukuk, whose investors do not truly own the assets, closely resemble bonds: their structure matters more than their name.
In Türkiye and elsewhere
The Turkish state issues kira sertifikası (ijarah sukuk), including some backed by gold; Diyanet ruled the gold-backed lease certificate permissible and the “gold bond” (altın tahvili), which pays interest, prohibited (decision 2023/102). Gulf states, Malaysia, Indonesia and the United Kingdom also issue sukuk.
Frequently asked questions
Is a sukuk fund necessarily compliant?
It is compliant if the sukuk it holds are compliant, according to its Shariah board. Look at the fund’s holdings and methodology in the fund directory.
Do sukuk have a fixed return?
The return depends on the rent or profits from the assets; some rents are fixed in advance period by period, which provides a regular income, but the capital is not guaranteed.