12 Pages Posted: 5 May 2014
Date Written: October 18, 2013
The concept of sukuk, plural of the Arabic word sakk meaning deed or instrument, is not new but in their modern form as capital market instruments, sukuk are certificates reflecting undivided, proportionate ownership in underlying tangible assets, usufruct, services or assets of a project or transaction.
This paper argues that the use of sukuk is truly Islamic only to the extent that it is Shari’a-compliant in both form and substance. Acknowledging the problems associated with varied interpretations of the Shari’a, it recommends that international standards be accepted as authoritative measures of Shari’a compliance, on the condition that these standards undergo continuous scrutiny by Shari’a scholars who will collectively determine whether the standards are substantively compliant. With reference to present international standards, this paper will show that many sukuk transactions are not Shari’a-compliant even in terms of form and are thus not truly Islamic, but each sukuk transaction must ideally be analysed individually.
Keywords: sukuk, islamic finance law
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