IslamicFinance.de

The constant growth in global sukuk issuance is not necessarily a sign of healthy development for the Islamic finance industry, for three reasons. Although at first sight, it appears that sukuk issuers have the necessary internal fund resources to finance their investment projects, the massive sukuk issuance actually evidences the fact that many of them are facing a shortage of liquidity. The second reason is that 95% of the sukuk issued recently are non asset-based sukuk and thus regarded as unsecured debt. As such, they are identical to conventional bonds in terms of credit risk. Furthermore, a considerable part of the issued sukuk don't comply fully with Shariah guidelines and close monitoring is still absent. There is a need to rethink the entire sukuk industry in order to tend towards more Shariah compliance and mitigate the adverse economic risks associated with the current trend.