Evolution in the Sukuk (Islamic Bonds) Structure: How do Market Demands and Shariah (Islamic Law) Solutions Shape Them?

Abstract

The issuing of sukuk (or Islamic bonds)as an instrument in Islamic finance has grown in recent years. The sukuk markets have advanced in the way of using tangible assets to receivables as an underlying asset. Premised on this development, sukuk structures have shifted from asset-backed to asset-based to asset-light and blended-assets. Given this evolution, this study will trace the development of innovation in the sukuk structure. Observed here are changes or trends in the sukuk structure, including how market participants‟ demands and Shariah issues influenced such changes in the sukuk. The main issues that emerge are: firstly, sufficient physical assets in response to the demands of issuers; and secondly, solutions offered by Shariah advisors who play a role in shaping the issued sukuk structure.