Sukuk

AAA

DEFINITION of 'Sukuk'

An Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law. Because the traditional Western interest paying bond structure is not permissible, the issuer of a sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee. The issuer also makes a contractual promise to buy back the bonds at a future date at par value.

INVESTOPEDIA EXPLAINS 'Sukuk'

Sukuks must be able to link the returns and cash flows of the financing to the assets purchased, or the returns generated from an asset purchased. This is because trading in debt is prohibited under Sharia. As such, financing must only be raised for identifiable assets.

RELATED TERMS
  1. Shirkah

    An Islamic finance term that describes a partnership between ...
  2. Islamic Banking

    A banking system that is based on the principles of Islamic law ...
  3. Loan

    The act of giving money, property or other material goods to ...
  4. Fixed Income

    A type of investing or budgeting style for which real return ...
  5. Usury

    The act of lending money at an interest rate that is considered ...
  6. Financing

    The act of providing funds for business activities, making purchases ...
RELATED FAQS
  1. What is an Islamic investment policy?

    Islamic investments are a unique form of socially responsible investments because Islam makes no division between the spiritual ... Read Full Answer >>
  2. Are waivers of subrogation clauses ever ineffective in preventing a third-party lawsuit?

    Sometimes waiver of subrogation clauses are ineffective at preventing a third-party lawsuits. In determining who is responsible ... Read Full Answer >>
  3. How do I find a good personal bankruptcy lawyer?

    While it is not necessary to hire an attorney to file bankruptcy, the rules that govern bankruptcy can be extremely complex, ... Read Full Answer >>
  4. What are unregistered securities or stocks?

    Before securities, like stocks, bonds and notes, can be offered for sale to the public, they first must be registered with ... Read Full Answer >>
  5. How does FINRA differ from the SEC?

    With all the financial organizations out there, knowing what they all do can be as complicated as knowing where to invest. ... Read Full Answer >>
  6. Are there regulations against monopolies?

    A monopoly occurs when a single company or group owns all or nearly all of the market for a particular type of product or ... Read Full Answer >>
Related Articles
  1. Investing

    The Advantages Of Bonds

    Bonds contribute an element of stability to almost any portfolio and offer a safe and conservative investment.
  2. Retirement

    Working With Islamic Finance

    There is no division between the spiritual and the secular in this type of socially responsible investing.
  3. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  4. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  5. Entrepreneurship

    Employment Negotiations: What To Ask For & How

    Improving their first offer: What you should know
  6. Entrepreneurship

    How To Talk To Headhunters

    8 tips on forging a fruitful relationship with an executive recruiter.
  7. Investing

    Should Amtrak Be Privatized?

    This story examines whether or not Amtrak, the US consumer rail system, should be privatized in the wake of its tragic accident.
  8. Personal Finance

    The Purpose Of a FMLA Form

    Parsing the different types of paperwork that accompany a leave of absence under the Family Medical Leave Act.
  9. Personal Finance

    8 Ways To Seriously Blow It With A Headhunter

    Job hunters, beware. These are the 8 things that blow your chances with headhunters. So pay attention to your behavior when you're being interviewed.
  10. Fundamental Analysis

    The Business Model Of Private Prisons

    How does the business model of private prisons work?

You May Also Like

Hot Definitions
  1. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
  2. European Central Bank - ECB

    The central bank responsible for the monetary system of the European Union (EU) and the euro currency. The bank was formed ...
  3. Quantitative Easing

    An unconventional monetary policy in which a central bank purchases private sector financial assets in order to lower interest ...
  4. Current Account Deficit

    A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services ...
  5. International Monetary Fund - IMF

    An international organization created for the purpose of: 1. Promoting global monetary and exchange stability. 2. Facilitating ...
  6. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!