Journal Article

The Appeal Of Ṣukūk As Asset-Backed Financing

Iqbal, Zamir

2015

Overview

This paper analyzes the appeal of ṣukūk as an asset-backed financing instrument and highlights their distinctive role compared to conventional debt instruments. The study explains that ṣukūk provide investors with actual ownership in underlying assets or projects, thereby linking returns to real economic performance rather than predetermined interest payments. This structural feature enhances fairness and transparency while reducing risks associated with speculation and excessive leverage. The research stresses that ṣukūk help align financial flows with productive economic activities, ensuring that capital is directed toward tangible investments rather than speculative trading. These characteristics have increased their global attractiveness for governments and financial institutions seeking to diversify funding sources and attract Sharia-compliant capital. However, the study also notes challenges such as the lack of standardized frameworks, variations in legal and regulatory regimes across countries, and relatively higher issuance costs compared to bonds. Despite these obstacles, the paper concludes that ṣukūk remain a promising instrument that combines principles of justice, participation, and financial stability, and that strengthening their legal and institutional infrastructure is crucial for consolidating their role in the international financial system. Abstract Written by Dar AlMandumh, 2025, Using AI

• Publisher: جامعة الملك عبدالعزيز - معهد الاقتصاد الإسلامي
• Subject: الإقتصاد / الإقتصاد الإسلامى / التمويل / الصكوك