UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Introduction to Sukuk



Like a beautiful rose, Islamic Finance is a gift to Humanity.

Sukuk: Sukuk (plural of SAKK) Arabic: صكوك‎, plural of صك Sakk –means Certificates in Arabic.  It has similar characteristics to that of a conventional bond with the difference being that Sukuk are asset-backed (while some argue Sukuk are actually asset-based);  Sukuk represent the proportionate beneficial ownership in the underlying asset.

Salam Sukuk: Salam is a sale whereby the seller undertakes to supply a specific commodity to the buyer at a future date in exchange of an advanced price paid in full on the spot.  The price is in cash, but the supply of the purchased good is deferred.  Salam Sukuk are issued for the purpose of mobilizing funds.

Istisna’a Sukuk: Istisna’a is the contract of sale of specified goods to be manufactured with an obligation on the manufacturer to deliver them upon completion.  Istisna’a Sukuk are securities whose holders are common owners of the property that is acquired on the Istisna’a contract basis.

Musharakah Sukuk: TheMusharakah contract is an investment partnership between two or more entities, which together provide the capital of the Musharakah and share in its profits according to a stipulated ratio and share losses on the basis of equity participation.  Musharakah Sukuk are securities in which its holders are owners of a specified property in common.   Its holders will gain from any increase or loss from any decrease in the underlying asset’s price.  Musharakah Sukuk have a specified maturity date and are negotiable in the secondary market.

Mudarabah Sukuk: Mudarabah is an investment partnership between two entities whereby one entity is mainly a provider of capital and the other is mainly the manager.

Ijarah Sukuk: Ijarah Sukuk are certificates, the holder of which owns in common part of an asset that has been transferred on the Ijarah contract basis.  Ijarah Sukuk have a fixed yield and can be transferred to other parties in the secondary market.  Ijarah Sukuk have various types of Sukuk such as Liquidity Ijarah Sukuk, Financing Ijarah Sukuk, and Leasing Ijarah Sukuk.

Convertible or Exchangeable Sukuk: Convertible or Exchangeable Sukuk certificates are convertible into the issuer’s shares or exchangeable into a third party’s shares at an exchange ratio, which is determinable at the time of exercise with respect to the going market price and a pre-specified formula.

Hybrid Sukuk: Hybrid Sukuk combine two or more Islamic Financing structures such as Istisna’a and Ijarah, Mudarabah and Ijarah, etc.

Sovereign Sukuk: Sovereign Sukuk are sukuk issued by a national government.  The term Sovereign Sukuk usually refers to Sukuk issued in foreign currencies, while Sukuk issued by national governments in the country’s own currency are referred to as  Government Sukuk.

Corporate Sukuk: Corporate Sukuk are issued by a corporation as opposed to the government.  Issuing Corporate Sukuk allows companies to raise funds in order to expand  business or raise capital for a specific project.

Quasi-Sovereign Sukuk: Sukuk issued by a private sector entity that is like Sovereign Sukuk.  It may carry explicit or implicit government guarantees.


(This information was taken from the Sukuk Report 2010 of the International Islamic Financial Market (



UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

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