Islamic finance

This overview is a guide to the Banking & Finance content within the Islamic finance—Sukuk subtopic, with links to appropriate materials.

The main difference between Sukuk and conventional bonds stems from the fact that Sukuk holders take indirect ownership of an underlying asset or pool of assets, compared with the holders of a conventional bond who purely hold financial debt of the relevant issuer. Under Shari'ah rules, Sukuk do not pay interest but generate a return through economic transactions in the form of the sharing or leasing of the underlying assets. In reality, however, Sukuk investors make the same commercial assessments as investors in a bond—their investment decision hinges on their assessment of the risk associated with the creditworthiness of the underlying obligor.

From the issuer/obligor's perspective, embarking upon a Sukuk issuance involves the additional hurdle of identifying an appropriate asset, or mix of assets, to underpin the instrument.

For more information, see Practice Note: Key principles of Islamic finance.