Modern sukuk

Modern sukuk is like conventional equity share emerged to fill a gap in the global capital market. Islamic investors want to balance their equity portfolios with bond-like products. Because sukuk are asset-based securities — not debt instruments — they fit the bill. In other words, sukuk represent ownership in a tangible asset, usufruct ( the right to use or enjoy a thing possessed, directly and without altering it.)  of an asset, service, project, business, or joint venture.

However, with sukuk, the initial investment isn’t guaranteed; the sukuk holder may or may not get back the entire principal (face value) amount. That’s because, unlike conventional bond holders, sukuk holders share the risk of the underlying asset. If the project or business on which sukuk are issued doesn’t perform as well as expected, the sukuk investor must bear a share of the loss.

Sukuk may be issued for existing assets or for assets that will exist in the future. Investors who purchase sukuk are rewarded with a share of the profits derived from the asset. They don’t earn interest payments because doing so would violate sharia.

Distinguishing Sukuk from Conventional Bonds
	Conventional Bonds	Sukuk
Asset ownership	Bonds don’t give the investor a share of ownership in the asset, project, business, or joint venture they support. They’re a debt obligation from the issuer to the bond holder.	Sukuk give the investor partial ownership in the asset on which the sukuk are based.
Investment criteria	Generally, bonds can be used to finance any asset, project, business, or joint venture that complies with local legislation.	The asset on which sukuk are based must be sharia-compliant.
Issue unit	Each bond represents a share of debt.	Each sukuk represents a share of the underlying asset.
Issue price	The face value of a bond price is based on the issuer’s credit worthiness (including its rating).	The face value of sukuk is based on the market value of the underlying asset.
Investment rewards and risks	Bond holders receive regularly scheduled (and often fixed rate) interest payments for the life of the bond, and their principal is guaranteed to be returned at the bond’s maturity date.	Sukuk holders receive a share of profits from the underlying asset (and accept a share of any loss incurred).
Effects of costs	Bond holders generally aren’t affected by costs related to the asset, project, business, or joint venture they support. The performance of the underlying asset doesn’t affect investor rewards.	Sukuk holders are affected by costs related to the underlying asset. Higher costs may translate to lower investor profits and vice ve

Dubai is the world’s largest centre for Sukuk listings at USD 36.71 billion, with Nasdaq Dubai the world’s largest single exchange at USD 33.96 billion.