What is Sukuk (Islamic Bonds)?
Sukuk are Sharia-compliant investment certificates that represent ownership in an asset, project, or business venture. They give holders a share of the underlying cash flow — usually rent or profit — rather than interest, which makes them halal alternatives to conventional bonds.
How It Works
- Asset-backed or asset-based structures (ijara, murabaha, wakala, mudaraba, hybrid)
- Issued by sovereigns, corporates, and supranationals
- Tradable on secondary markets, with regular profit distributions
- Reviewed and approved by a Sharia board at issuance
- IFRS treatment usually mirrors equivalent conventional debt or hybrid instrument
Saudi Context
Saudi Arabia is one of the largest sukuk markets globally. The Ministry of Finance issues sovereign SAR sukuk monthly; Aramco, PIF, banks, and corporates issue both local and international sukuk. The CMA regulates issuance and Tadawul lists the secondary market.
Example
The Saudi government issues a SAR 5B 10-year sukuk-al-ijara backed by the lease of government buildings. Investors receive periodic rental distributions and the principal at maturity. The structure is fully Sharia-compliant and listed on Tadawul, where institutional and retail investors can trade it.