A Compilation of Contemporary Sukuk Risks

Tamiza Parveen



Sukuk and conventional bond operates in the same market but the prohibition of interest in Shariah restricts sukuk within profit sharing operation and thus differentiates it from interest based bonds. Investors are required to share risks with entrepreneurs under this Islamic instrument which often make it less competitive than its conventional competitor. This study reviews past literatures to compile all contemporary suck risk and discusses several mechanisms to mitigate those risk. A total amount of thirteen risks related to various aspects of Sukuk structure were identified along with four risk management techniques which were derived from the conventional equity market concept and found to be valid for Sukuk. The limited amount of literature on the Sukuk risk has limited the investigation and the qualitative nature of this study could not provide any empirical evidence of the extent of the risk to the investors. Information relating to Sukuk risk will benefit both Sukuk Security providers and investors to understand the potential problems ahead and takes precautions at an early stage to avert any disaster which has been experience in the conventional equity market. The extent of risk related to Sukuk covered in this study is the first of its kind as it explores all potential roots and finally offers techniques to prevent some of the risks for the investors benefit. Information provided through this study will serve as a guide for potential investors of Sukuk issues to make an informed decision and enable them to minimize the risk to secure a healthy return from their investment. 


Keywords: Sukuk, Shariah, Riba, Islamic Capital Market, Risk


Al-Amine, M., 2008. Sukuk market: Innovations and challenges. In ISLAMIC CAPITAL MARKETS. Available at: http://ibfd-fund.com/docs/Islamic Capital Markets - Products, Regulation and Development.pdf#page=46 [Accessed May 19, 2015].

Ali, D., 2008. Issues in Islamic Debt Securitization. Essential Reading in Islamic Finance, pp.443 – 493. Available at: http://scholar.google.com/scholar?q=Issues+in+Islamic+debt+securitization&btnG=&hl=en&as_sdt=0%2C5#0 [Accessed April 10, 2015].

Al-Omar, F. & Abdel-Haq, M., 1996. Islamic banking: theory, practice, and challenges.

Bakar, M., 2000. Contracts in Islamic commercial and their application in modern Islamic financial system. Unpublished article.

Dar, H. & Azami, T., 2010. Global Islamic Finance Report (GIFR) 2010. UK: BMB Islamic UK.

Goud, B., East Cameron gas Sukuk. Zawya Collaborative Sukuk Report. Available at: http://scholar.google.com/scholar?q=Collaborative+Sukuk+Report&btnG=&hl=en&as_sdt=0%2C5#1 [Accessed April 19, 2015].

Jabeen, Z. & Javed, M., 2007. SUKUK-Structures: An Analysis of Risk-reward Sharing and Wealth Circulation. The Pakistan Development Review, 46(4), pp.405 – 419.

Majid, H.A., Shahimi, S. & Bangaan, M., 2010. Sukuk defaults and its implication: a case study of Malaysian capital market. 8th International Conference of Isalmic Economic and Finance.

Merton, R., 1995. Financial innovation and the management and regulation of financial institutions. Journal of Banking & Finance. Available at: http://www.sciencedirect.com/science/article/pii/037842669400133N [Accessed February 13, 2015].

Neftci, S. & Santos, M., 2003. Puttable and extendible bonds: developing interest rate derivatives for emerging markets.

Saeed, A., 1995. The moral context of the prohibition of Riba in Islam revisited. American Journal of Islamic Social Sciences, 12(4). Available at: http://i-epistemology.net/v1/attachments/409_V12N4 Winter 95 - Saeed - The Moral Context of the Prohibition of Riba.pdf [Accessed January 02, 2015].

Tariq, A., 2004. Managing financial risks of sukuk structures. Loughborough University, UK, September (mimeo).

Tariq, A. & Dar, H., 2007. Risks of Sukuk structures: Implications for resource mobilization. Thunderbird International Business Review, 49(2), pp.203 – 223.

Usmani, T., 2007. ṣukūk and their Contemporary Applications. Retrieved from the internet. Available at:http://scholar.google.com/scholar?q=Sukuk+and+their+contemporary+application&btnG=&hl=en&as_sdt=0%2C5#1 [Accessed May 05, 2015].

Wijnbergen, S. Van & Zaheer, S., 2013. Sukuk Defaults: On Distress Resolution in Islamic Finance. Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2293938 [Accessed March 11, 2015].

Wilson, R., 2008. Innovation in the structuring of Islamic sukuk securities. Humanomics, 24(3), pp.170 – 181.

پاراگلایدر Full Text: PDF


  • There are currently no refbacks.

Creative Commons License
This work is licensed under a Creative Commons Attribution 3.0 License.

ISSN : 2251-1555