A Compilation of Contemporary Sukuk Risks

Tamiza Parveen

Abstract


Abstract

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



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ISSN : 2251-1555