Definition for : Sukuk

Islamic Bond products are represented by Sukuks. The Sukuk is to Islamic finance what Asset backed securities (ABS) are to conventional finance. It has a Maturity that is determined in advance and is backed by an asset which makes it possible for the Investment to earn a Return without the payment of Interest. Unsurprisingly, Sukuks are structured in such a way that their holders run a Credit risk and receive part of the Profit and not a fixed Interest payment in advance, like for an ABS. The products underlying Sukuks could be represented by contracts such as the Ijara, Musharaka or the Mudharaba.
(For more, see the Newsletter, November 2006 )
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