Do Sukuk Financial Instruments Mirror Conventional Bonds?

Oyebola Etudaiye-Muhtar, Bolaji Tunde Matemilola

Abstract

Growth in both Islamic finance literature and sukuk issuance in the Islamic capital market over the last decade has led to the question of whether sukuk are variants of conventional bonds or they differ. In order to provide an answer to the question, this study reviews extant literature to extract similarities and differences between the two debt instruments. The review shows that although sukuk are Islamic debt financial instruments that confer part-ownership of the underlying assets on their holders, conventional corporate finance theories are also applicable to sukuk. Consequently, the paper concludes that for policy makers and researchers to make a clear distinction between the two debt instruments, there is need to expand sukuk research to cover areas such as risk-shifting and risk sharing. Additionally, sharia based pricing benchmark for sukuk may be adopted.

Keywords

Bonds; Debt; Islamic Capital Market; Sukuk

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