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. Interest

    1. The charge for the privilege of borrowing money, typically ...
  2. Loan

    The act of giving money, property or other material goods to ...
  3. Usury

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

    The act of providing funds for business activities, making purchases ...
  5. Fixed Income

    A type of investing or budgeting style for which real return ...
  6. Islamic Banking

    A banking system that is based on the principles of Islamic law ...
Related Articles
  1. The Advantages Of Bonds
    Investing

    The Advantages Of Bonds

  2. Working With Islamic Finance
    Retirement

    Working With Islamic Finance

  3. What is an Islamic investment policy?
    Investing

    What is an Islamic investment policy?

  4. Advanced Bond Concepts
    Bonds & Fixed Income

    Advanced Bond Concepts

Hot Definitions
  1. Halloween Strategy

    An investment technique in which an investor sells stocks before May 1 and refrains from reinvesting in the stock market ...
  2. Halloween Massacre

    Canada's decision to tax all income trusts domiciled in Canada. In October 2006, Canada's minister of finance, Jim Flaherty, ...
  3. Zombies

    Companies that continue to operate even though they are insolvent or near bankruptcy. Zombies often become casualties to ...
  4. Witching Hour

    The last hour of stock trading between 3pm (when the bond market closes) and 4pm EST. Witching hour is typically controlled ...
  5. October Effect

    The theory that stocks tend to decline during the month of October. The October effect is considered mainly to be a psychological ...
  6. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities.
Trading Center