IslamicFinance.de

A study discusses four major defaults on sukuk that have happened since 2007. These case studies make clear that most problems can be traced back to clauses and structures that made the Sukuk more like conventional bonds. Furthermore, once default happened, most of the Sukuk discussed did not transfer the underlying assets to the Sukuk holders. So, in the event of default, due to limited recourse provisions, Sukuk holders often had no collateral to resort to. The case studies highlight the importance of the legal institutions of the country where the collateral is likely to be contested. The conclusion of the study is that Islamic Finance is not failing to deliver on its promises because Shariah compliance implies a clear allocation of property rights.