Islamic Capital Markets: Understanding Sukuk

Introduction

Sukuk, commonly known as Islamic bonds, have become synonymous with Islamic finance in recent years. The first modern sukuk was issued in 1990 by Malaysia Shell MDS Sdn Bhd worth RM 120 million. This was followed by the first US$ 150 million international sukuk by another Malaysian company called Kumpulan Guthrie Berhad in 2001 and a USD 600 million sukuk by the Malaysian government in 2002. Today, the total sukuk outstanding globally have reached almost US$ 350 billion. The global sukuk market has witnessed double digit annual growth over the last decade and a half, and continues to grow at an impressive pace as a shariah compliant alternative to traditional bonds. Despite significant growth, sukuk still represent a small proportion of global debt markets (the size of the global bond markets is estimated to be close to US$ 100 trillion).