what is a sukuk 
a sukuk is an islamic financial certificate similar to a bond in western finance that complies with islamic religious law commonly known as sharia since the traditional western interest paying bond structure is not permissible the issuer of a sukuk essentially sells an investor group a certificate and then uses the proceeds to purchase an asset that the investor group has direct partial ownership interest in the issuer must also make a contractual promise to buy back the bond at a future date at par value understanding sukukwith the rise of islamic finance sukuk have become extremely popular since 2000 when the first such products were issued in malaysia bahrain followed suit in 2001 fast forward to current times and sukuk are used by islamic corporations and state run organizations alike around the globe taking up an increasing share of the global fixed income market islamic law prohibits what s known as riba or what we understand as interest in the west therefore traditional western debt instruments cannot be used as viable investment vehicles or ways to raise capital for a business to circumvent this sukuk were created in order to link the returns and cash flows of debt financing to a specific asset being purchased effectively distributing the benefits of that asset this allows investors to work around the prohibition outlined under sharia and still receive the benefits of debt financing however because of the way that sukuk are structured financing can only be raised for identifiable assets thus sukuk represent aggregate and undivided shares of ownership in a tangible asset as it relates to a specific project or a specific investment activity an investor in a sukuk therefore does not own a debt obligation owed by the bond issuer but instead owns a piece of the asset that s linked to the investment this means that sukuk holders unlike bond holders receive a portion of the earnings generated by the associated asset sukuk vs traditional bondssukuk and conventional bonds do share similar characteristics but also have important key differences both provide investors with payment streams bonds and sukuk are issued to investors and may be used to raise capital for a firm both are considered to be safer investments than equities 