In the traditional economic system bonds are issue which gives interest to its bondholders from the enterprises where the money is invested. The bondholder has no ownership in the enterprises, as they only earn interest on loan. Sukuk (Islamic bonds) has different concept from this traditional approach in which Sukuk holder earn the profit on his investment and also claim in the ownership of investment. (Usmani) Sukuk is a new innovative Islamic financing mode which is being considered the fastest growing mode in capital market. Sukuk products have immense scope and high potential of growth in the markets. Different Sukuk Structures involve Murabaha, Musharakah and Ijarah based Sukuk those are providing fixed and variable returns. The history of Sukuk is not too old in capital market therefore it is facing different problems and controversies from the Shariah points of views. Sukuk has great potential for the investors those want to keep their fund in Islamic banks and they don’t want to involve in Riba or interest. A large number of Muslims are holding great sum of wealth like oil rich country’s Muslim those want to keep the fund according to the Islamic law. (Wilson 2005)
Capital markets are helpful to generate fund and diversify the risk among different levels. Islamic capital markets are the use of investment with Shariah compliant. Form the past few years’ Islamic financial sector gain strength by new innovative products instruments and practices. First time the Sukuk issued by sovereign states in 2001 and 2002 and after that corporate Sukuk became more popular. The data collected during 2001 to 2007 shows that the corporate Sukuk were high them sovereign Sukuk. Mostly Ijarah Sukuk was issued by sovereign and Murabaha and Musharakah Sukuk issued by corporate. (Sulman) Researcher stated that the average growth of Islamic finance is about 30 percent per year from the past decade. This tremendous growth rate in Islamic finance is helping different economies to create the employment opportunities. It is true that development structure and economic activities are increasing with the help of Islamic financial system. Islamic financial system based on different product in which Sukuk (Islamic bonds) are considering most appreciated product. Sukuk is a new Islamic product in the market and require Islamic researcher’s attention on that topic. As Sukuk a new in the market it is facing different challenges and has great growth opportunities (Zin, Hashim 2011) Literature Review
History of Sukuk
Malaysia is considered as pioneer in Sukuk issuance, Shell MDS issued world first Sukuk in Malaysia amount of 33 million dollars. First time internationally Sukuk were issued Kumpulan Guthrie Berhad in 2001 which is a Malaysian company. These Sukuk issued to collect investments from Asian and Middle Eastern investors. Second International Sukuk issued by federation of Malaysia, these Sukuk issued in dollar and sold internationally. (Roger) Malaysis Global Sukuk Inc issued the 600 million sovereign Sukuk in 2002. The kingdom of Bahrain had issued the Sukuk of 250 million in 2003 that were sovereign Sukuk. Qatar issued the sovereign Sukuk amount of 700 million in 2003. Solidarity (IsDB) a Saudi corporation issued 400 million Sukuk in 2003. The kingdom of Bahrain issued another sovereign Sukuk amount of 250 million in 2004. Corporate Sukuk (National Central Cooling Co) were issued in UAE amount of 100 million in 2004. Islamic Development bank issued corporate Sukuk in Saudi Arabia amount of 500 million in 2005. Durrat al- Bahrain issued corporate Sukuk amount of 153 million in 2005. Bahrain financial Harbour issued sovereign Sukuk amount of 270 million in 2005. Dubai Metals and Commodities issued corporate Sukuk in UAE amount of 200 million in 2005. (Sole). Musharakah Sukuk was issued of 200 million internationally first time in 2005 by Dubai Metals &...