Inherent tension in #sukuk market, says analyst

The Dana Gas controversy has shown that Sharia-compliance driven structural complexity can expose investors to legal risks that do not apply to conventional instruments. The industry has struggled to harmonise, given the fractured nature of the Islamic capital markets. Most current market participants seek to replicate the risk, return and rating profile of the corresponding conventional instrument. In the current sukuk market there exists an inherent tension between the underlying equity and asset financing principles encouraged by Islam and the current investor/issuer demand for a debt-like instrument. If implemented, standards would reduce the costs for investors and issuers. Issuers can re-use already endorsed market structures saving costs and hence encouraging them to issue more.