The analysis of theoretical research on Sukuk Islamic Security

Sherifah Oshioke Musa

Department of Economics and Entrepreneurship
Faculty of Economics and Management Sciences
Waidsum University
Hamida Mohamed Osman Ahamed Elfaki,
International Islamic University

Abstract
This review paper gives a thorough examination of theoretical research on Sukuk Islamic
securities, focusing on its specific features inherent in Sharia principles, such as risk-sharing and
asset backing. The review of literature looks at major studies that show the importance of Sharia
compliance and risk management for the integrity of Sukuk. Also, this review paper highlights
the difficulties in Sukuk issuance, emphasizing their vulnerability to global economic downturns.
At the same time, it examines the significance of Shari'ah compliance for Sukuk, which
distinguishes them from traditional bonds. The review paper finishes by identifying gaps in the
literature and suggests future research topics, providing significant insights for Islamic finance
policymakers, practitioners, and scholars.

Keywords: Sukuk, risk sharing, asset backing

I. Introduction
I.1 Background of studies
Sukuk Islamic securities are financial instruments built according to Islamic principles, with the
goal of providing an ethical and Sharia-compliant alternative to traditional bonds (Abubakar,
Nafees & Dorloh, 2023). Sukuk, as opposed to interest-bearing bonds, indicate ownership in
tangible assets, projects, or services, allowing for risk-sharing while conforming to the Islamic
prohibition on interest (Riba). Sukuk issuers raise funds by selling certificates to investors, who
receive a portion of the income generated by the underlying assets in return (Vishwanath &
Azmi, 2009). This equity-based strategy coincides with Islamic finance concepts of justice and
asset backing, making Sukuk an appealing investment option for individuals seeking Sharia-
compliant financial instruments that contribute to global financial market diversification.
In recent years, Islamic finance has seen extraordinary development and innovation, with
Sukuk Islamic securities emerging as a significant tool within this ever-changing ecosystem.

1
Further, Abdo (2014) mentioned that Sukuk, which are based on Islamic principles that forbid
the payment or receipt of interest (Riba) and encourage risk-sharing and asset-backed lending,
are gaining popularity due to their ethical and Sharia-compliant nature. Sukuk, as an alternative
to conventional bonds, not only serve as a financing tool for governments and enterprises, but
they also adhere to the Islamic finance principles of fairness and equity. In all aspects of Islamic
finance just like Sukuk securities is an alternative to manage socio economic situation in a
country. Islamic finance is understood in the context of Islamic attitude towards ethics, wealth
distribution, social and economic justice. The system is based on the goals, principles, and values
of the sharia law, (Sherifah & Marhanum 2020).
Sukuk's significance goes beyond Islamic finance, grasping the interest of the global
financial industry. Today, the rise in interest is a reflective of a bigger trend. While the
integration of Islamic financial products into mainstream global finance, reflects the
development of the Islamic finance industry. A sukuk is an interest in an underlying funding
arrangement regulated in accordance with sharia, entitling the holder to a proportionate share of
the returns generated by such arrangement at a defined future date, the return of the capital.
Sukuk holder is granted an ownership interest in the assets or business being financed, and the
return is tied to the performance of the underlying economic assets or projects (Pirgaip, Arslan-
Ayaydin, & Karan, 2021).
Financing capital intensive economic projects are financially challenging. These projects
are sometimes stopped after the first stage of its feasibility assessment due to the project money
matters (Deji, 2024). Hence, project managers and investors around the world are becoming
more interested in Sukuk, drawn by the promise for predictable returns combined with adherence
to ethical and socially responsible investment practices. The investment practices are guided by
Islamic work ethics based on the concept of faith and good deeds. Islamic work ethic will not be
formed without a foundation of faith and good deeds. They are interrelated and cannot be
separated. Good deeds cannot exist without faith, as well as faith that is not accompanied by
good deeds will be meaningless. In carrying out any work, a person has three responsibilities, the
responsibility to Allah SWT, responsibility to oneself, and responsibility to others (Ahdi &
Rozikan, 2023).
The increasing numbers of research publications can be overwhelming to stay updated
with in recent developments on a specific topic. A review article provides an overview and an

2
evaluation of the current state of knowledge about a specific area of research (Bahishti, 2021).
This article paper is designed to allow for a methodical investigation of the theoretical
environment around Sukuk Islamic securities. Following this introduction, the literature review
section will provide a synthesis of previous theoretical study on Sukuk, laying the groundwork
for further investigation. The methodology section will describe the strategy used to choose and
review the literature, assuring an objective and thorough evaluation. The findings from the
literature review will be presented in the result analysis section, which will categorize and
analyze the theoretical views. The next section will present an overview of research findings and
will kick off discussions, providing insights into the significant topics and disputes discovered.
Finally, the conclusion and recommendations will summarize the paper's contributions,
consequences, and future study directions in the rapidly evolving field of Sukuk Islamic
securities.

1.2 Objective
This study is to examine previous studies and show the theoretical foundations of Sukuk Islamic
securities. To shed light on the conceptual frameworks, models, and insights that have shaped the
discourse surrounding Sukuk by performing a comprehensive examination of previous research.
This investigation is hoped to add to the academic understanding of Sukuk and provide useful
insights for practitioners, policymakers, and scholars interested in Islamic finance and banking.

II. Literature Review

2.1 Background theory
This research theory is a logical exploration of sukuk literatures, the beliefs, and assumptions.
Extensive theoretical study has been conducted on Islamic securities, indicating the growing
importance of Islamic finance in worldwide markets. Scholars in this discipline have investigated
many aspects of Sukuk, investigating important concepts, principles, and structures that explain
its distinct characteristics. This review is about analysis of sukuk Islamic security for risk
management, asset backing and its challenges.

2.2 Previous Studies

This sub-section describes relevant, comprehensive past studies related to the topic.

3
Sukuk Islamic Security for Risk Management and Asset-Backing
Sukuk are distinguished from conventional bonds by their adherence to Sharia norms, which
emphasize risk-sharing and asset backing. To illustrate, the study by Aleshaikh, Nourah, and
Mohammad (2016) tackles the objections leveled at recent sukuk issuances by investigating the
risks, agency costs, and Sharia compliance connected with these Islamic instruments. Using a
case study method, the research focuses on asset-backed sukuk structures and applies an
inductive technique to analyze legal and financial difficulties. The primary goal is to assess
conformity to Sharia principles while minimizing agency costs and resolving conflicts in sukuk
systems. The paper identifies the concept of co-ownership as a solution for reducing agency
costs, increasing competitiveness, and allocating risk in sukuk structures. Despite the
endorsement of famous experts, the study contains inconsistencies with AAOIFI Shariah criteria,
particularly in the areas of assurance, ownership, principle, return, and maintenance costs.
Additionally, the findings show that, while SEC and sukuk cases contain more credit risk, they
do not correspond to the sukuk concept, emphasizing the need for genuine ownership in
investment (Aleshaikh, Nourah, & Mohammad, 2016). Consequently, this study emphasizes the
complicated nature of sukuk structures, emphasizing the importance of Sharia compliance and
adequate risk management to ensure the integrity and competitiveness of these Islamic
instruments in comparison to conventional bonds.
Similarly, the discussion in Abdullah Leslie (2011) sections on 'Securitization' and
'Asset-based and Asset-backed Sukuk' concentrates around the process of securitization and the
contrasts between asset-based and asset-backed Sukuk, emphasizing their Sharia compliance.
Sukuk are presented as products of the securitization process, which converts illiquid assets into
marketable securities. Asset-backed Sukuk distinguishes itself by tying payouts to underlying
productive assets that also serve as security, thereby complying with Sharia compliance's basic
idea. In addition, Bakri (2020) stated that the special purpose vehicles (SPVs) or special purpose
Murib (SPM) play an important role in guaranteeing bankruptcy remoteness, protecting Sukuk
holders from risks associated with the originator's bankruptcy. However, the discussion
underlines a practical issue in which some Sukuk arrangements preserve originator ownership of
assets, thereby jeopardizing Sharia compliance and exposing Sukuk investors to risks like those
of conventional bonds.

4
 Furthermore, the investigation of asset-based and asset-backed Sukuk enlarges on the
contrast between the two. Asset-backed Sukuk entails the actual sale of underlying assets to
Sukuk holders, creating legal ownership and bankruptcy distance (Abdullah 2011). This assures
that Sukuk holders they are actual owners of the assets, which is consistent with the Sharia
principle of ownership and risk-sharing.
In contrast, asset based Sukuk is like traditional unsecured bonds in that Sukuk holders
only have beneficial ownership (Muhamed & Radzi, 2011; Abdullah Leslie 2011). This exposes
them to more risk, which stems mostly from the issuer rather than the assets. The discussion
emphasizes that, even though the majority of Sukuk are labeled as asset-based, investors' legal
standing is more akin to creditors, particularly in insolvency proceedings, emphasizing the
importance of distinguishing between asset-based and asset-backed Sukuk for Sharia compliance
and risk management. Tamweel's asset-backed Sukuk is highlighted as an exception in which
legal ownership of assets is transferred to Sukuk holders, demonstrating a Sharia-compliant
model that provides actual ownership and risk exposure to asset performance rather than issuer
credit risk (Abdullah 2011). This discussion emphasizes the importance of asset-backed
structures in maintaining Sukuk's genuine adherence to Sharia norms, notably in terms of
ownership and risk-sharing, which distinguishes them from conventional bonds.

Issues with Sukuk Acting as an Islamic Financial Instrument

On the other hand, despite the elements of Sukuk Islamic Security to adhere to the Shari’ah
principles, there were some Shari’ah related problems and decline in the issuance of sukuk as a
risk management and asset backed Islamic financial instruments. For instance, Muhamed and
Radzi (2011) discussion under the sup-topic 'Shariah issues and decline in sukuk issuance'
highlights the challenges faced by the Islamic capital market in 2008 and the subsequent decline
in Sukuk issuance, providing insights into how these issues contrast with the concept of adhering
to Shari'ah principles, thus distinguishing Sukuk from conventional bonds. The decline in Sukuk
issuance is linked to a variety of issues, including the global economic slump, less liquidity,
falling oil prices, and decreased investor confidence (Ibrahim, 2015; Muhamed & Radzi, 2011).
The Sukuk market encountered excessive expectations, contrary to earlier assumptions that
Islamic finance, with its distinctive qualities, would be immune to the global crisis. The authors
emphasize the necessity of recognizing that Sukuk, like other financial instruments, are

5
vulnerable to risks such as credit risk, casting doubt on its robustness during economic
downturns.
Additionally, the problem of 'Sukuk holders' ownership of enterprise assets,' as raised by
Yean (2009), highlights the necessity of Shari'ah standards in distinguishing Sukuk from
conventional bonds. The basic principle is that Sukuk holders’ own assets, ensuring that Sukuk
are backed by identifiable, tangible assets throughout its lifetime and that Sukuk holders have
proprietary interests in the financed assets. The data contrasts with traditional bonds in which
ownership is not a key component.
Scholars like Iqbal and Mirakhor (2011) have delved into the theoretical foundations of
Sukuk, emphasizing the significance of Sharia compliance and the equal distribution of risks and
profits. According to the Shariah Board of AAOIFI, Sukuk investors must have rights over the
Sukuk assets, and the assets must be legally transferred from the originator company (Hanefa,
Noguchi, & Muda, 2013). The AAOIFI emphasizes that Sukuk risks and rewards should be
connected to Sukuk assets, promoting the profit-and-risk-sharing model (Iqbal & Mirakhor,
2011). This contrasts sharply with traditional bonds, where the investor's return is often fixed and
unrelated to individual assets.
The requirement for a confirmed transfer of ownership in the manager's books, as well as
the prohibition on keeping assets as the manager's personal property, reinforce the adherence to
Shari'ah standards. The AAOIFI verdict intends to ensure that Sukuk holders can recoup their
investment even if the originator goes bankrupt, emphasizing the asset-backed securitization
premise. Further, East Cameron Partners LP (ECP Sukuk) and Investment Dar case studies show
real-world circumstances in which the nature of Sukuk ownership was called into doubt (Yean,
2009). The ECP Sukuk case emphasized the necessity of a true sale of assets, and the judge's
finding reaffirmed the notion of Sukuk holders' investment based on the transfer of royalty
interest being characterized as a true sale. As an asset based or unsecured Sukuk, the Investment
Dar case demonstrated the potential lack of priority for Sukuk holders over the assets in the event
of default.
The obstacles and constraints encountered in implementing AAOIFI recommendations,
such as those seen in Indonesia, highlight the importance of legal and regulatory support for the
transfer of ownership rights. Furthermore, the topic of Shariah law enforcement in various
countries, as shown in the Beximco case, emphasizes the significance of selecting jurisdictions

6
that fit with Shariah principles. Hence, the evidence supplied by Yean (2009) demonstrates how
Sukuk, by requiring asset ownership, corresponds to Shari'ah standards, emphasizing the
principles of profit and risk sharing and distinguishing Sukuk from conventional bonds.
Despite these substantial contributions, there are certain gaps in the literature, particularly
when it comes to addressing the dynamic nature of Sukuk structures and the impact of regulatory
regimes on their performance. Furthermore, disagreements emerge about the designation of
certain Sukuk as true risk-sharing instruments, emphasizing the importance of sophisticated and
up-to-date research. This review tries to fill these gaps by synthesizing material from many
sources and constructing a complete theoretical foundation for later research of Sukuk Islamic
securities (Elfaki, Musa, & Deji 2023)..

III. Review criteria

This research adopts qualitative and analytical research approach. A literature reviewer may use
quantitative research approaches to synthesize quantitative-based works and qualitative research
approaches to synthesize qualitative-based works (Adenigba & Akorede, 2023). Hence the
philosophical approach on this research is mixed methods. Philosophical approach shows the
belief about the way in which data about the phenomenon is gathered, analysed, and used. It
shows the shared belief systems that influence this kind of knowledge sought and how the
evidence is been interpreted. In this study relevant texts and materials that discuss the subject of
Sukuk were sought and reviewed analytically (Sherifah & Marhanum 2018).

3.1 Data Sources

The secondary data sources for this review paper were captured from databases like Google
Scholar, ResearchGate and Semantic Scholar. Further, the journals the articles were reviewed
from included International Legal News, International Conference on Business and Economic
Research, ICR Journal, Pacific-Basin Finance Journal, The Journal of Islamic Economics and
Business Research, The Journal of Project Finance, and Global Finance Journal.

Table 1: The Databases, Journals and Other Sources for this Review Paper

Databases ● Google Scholar

● ResearchGate

7
 ● Semantic Scholar

Journals ● International Legal News

● International Conference on Business and Economic Research
● ICR Journal
● Pacific-Basin Finance Journal
● The Journal of Project Finance
● Global Finance Journal
● The Journal of Islamic Economics and Business Research

Other Sources ● Reputable Islamic Finance publications

● Books and reports from recognized institutions related to Sukuk

Search Process, Quality Assessment, Geographical Coverage

This methodology ensures a systematic and comprehensive examination of theoretical research
publications on Sukuk, with a focused timescale, relevance to important issues, and geographical
settings considered. The purpose of quality evaluation criteria is to improve the credibility and
dependability of the chosen literature.

Table 4: The Search Process, Quality Assessment, and Geographical Coverage for this Review
Paper

Search Process Quality Assessment Geographical Coverage

● Keywords entered the ● Emphasis on ● The review paper

databases (Google selecting papers was emphasizes Sukuk as
Scholar, ResearchGate, chosen from an Islamic financial
Semantic Scholar) and reputable journals, instrument for risk
journals are “Sukuk”, conferences, and management and
“Islamic Securities”, respected authors in assets.
“risk management”, the field of Islamic ○ Primarily in
“asset backing” and Finance South-East
“Shari’ah compliance.” Asia

8
 ● Boolean operators like ● The quality of the (Malaysia and
(And, Or) were used to papers was assessed Indonesia) and
refine the searches. based on the depth the Middle
● Iterative refinement to of discussion, East (Saudi
filter out unwanted data methodology, and Arabia, Sudan,
for this review paper relevance to the and Bahrain)
specified focus area

3.2 Sample and procedure

The research design comprises of the overall strategy which integrate the different components
of
the study to ensure an effective way to address the research problem. This research consists of
the collection, measurement, and analysis of secondary data. This literature review focuses on
theoretical research papers related to Sukuk as Islamic securities. Furthermore, the review covers
the last 15 years (2008-2023), emphasizing papers discussing Sukuk's risk management, asset
backing, Shari’ah compliance, and differentiation from conventional bonds. The procedure of
selection involved is Inclusion and exclusion criteria (Hanifah, Abdulwahab & Sherifah 2023).

The Inclusion and Exclusion Criteria

The inclusion criteria of this review paper include papers published between 2008 to 2023. Also,
the sources of data include journal articles and conference papers explaining Sukuk as an Islamic
Security, specifically emphasizing on risk management and asset backing. Additionally, the
papers address the concepts of Shari’ah principles of Sukuk and relating it back to differentiating
it from conventional bonds.
Further, the exclusion criteria include books, newspapers, and websites as the sources for
this review paper. Also, it discredits papers and studies that were published prior to 2008.
Finally, this review paper does not include papers that did not include Sukuk as Islamic
Securities in risk management and asset backing in accordance with the Shari’ah principles.

9
 Table 2: The Inclusion and Exclusion Criteria for the Review Paper
Inclusion Exclusion

Sources Journal Articles, Conference papers Books, newspapers, websites

Years 2008 to 2023 < 2008

Type of ● Sukuk as an Islamic Financial ● Papers that are unrelated to

Data
instrument in risk management Sukuk as Islamic Securities
and asset backing. ● Studies not focusing on risk
● Papers that address the Shari’ah management, asset backing or
principles related to Sukuk and Shari’ah compliance
differentiating it from
conventional bonds

IV. Analysis and Discussion

The Sukuk Islamic securities literature review provides a complete grasp of numerous theoretical
viewpoints, themes, and issues of Sukuk. The important findings are classified according to
topics, methodology, and other pertinent criteria. The number of papers searched were 34 papers,
and of those 14 papers were selected to be analyzed in the Literature Review section of this
review paper. Further, these 14 papers were highly relevant to the theoretical research of Sukuk
Islamic Securities.

Sukuk Structures and Shari’ah Compliance

Aleshaikh, Nourah, and Mohammad (2016) examine Sukuk structural risks, agency costs, and
Sharia compliance. The paper proposes co-ownership as a way for lowering agency costs and
dispersing risk. Inconsistencies with AAOIFI Shariah requirements, on the other hand, are noted,
highlighting the intricacy of Sukuk arrangements.

10
Abdullah Leslie (2011) examines securitization as well as the differences between asset-based
and asset-backed Sukuk. The significance of differentiating between the two for Sharia
compliance and risk management is emphasized. Tamweel's asset backed Sukuk is used to
demonstrate true ownership and risk exposure to asset performance.

Challenges and Decline in Sukuk Issuance

Muhamed and Radzi (2011) explore the issues that the Islamic capital market encountered in
2008, which resulted in a decrease in Sukuk issuance. The global economic downturn, liquidity
concerns, declining oil prices, and decreased investor confidence are among the issues. The
report highlights Sukuk's vulnerability to hazards such as credit risk during economic downturns.

Ownership and Shari’ah Compliance

Yean (2009) emphasizes the significance of Sharia principles in Sukuk, emphasizing the fact that
Sukuk holders’ own assets. The topic contrasts Sukuk with traditional bonds, in which ownership
is not a major factor. The report uses real-world case studies, such as the ECP Sukuk and
Investment Dar, to highlight the need of asset-backed structures in ensuring Sharia compliance
with Sukuk.

Enforcement and Regulatory Challenges

In the context of Islamic banking, there are several obstacles to overcome, to implement and
enforce the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)
requirements for Sukuk-based contracts. AAOIFI establishes standards to guarantee
standardization, transparency, and adherence to Sharia law. Further, Kammer (2015) mentioned
that one significant obstacle is the variety of legal and regulatory frameworks found in different
jurisdictions, which makes it challenging to apply AAOIFI principles consistently. Sukuk
structures and practices are inconsistent because of the disparate ways that various nations
interpret and implement these rules.

Figure 1 below illustrates the Sukuk enforcement model. The literature discussed in 2.2
examines the difficulties encountered in implementing AAOIFI guidelines in Indonesia.
Furthermore, the Beximco case emphasizes the importance of choosing jurisdictions that adhere
to Sharia principles for successful enforcement.

11
 Figure 1 : Sukuk enfoncement model
Source : Rattu (2013)

Common Trends and Insights

Shariah compliance in Sukuk structures is continuously emphasized in the literature. Real
ownership, asset-backed arrangements, and compliance with AAOIFI criteria are recurring
themes. Also, the sensitivity of sukuk to risks, particularly credit risk, is recognized. Asset-
backed structures are presented as a strategy to reduce risks while ensuring true risk sharing.
Additionally, Sukuk holders' ownership of assets is frequently noted as a fundamental
differentiation from conventional bonds. The discussion highlights the importance of genuine
ownership and risk exposure to asset performance.

12
 Figure 2: GCC Issuance trends of USD Denominated Debt and Islamic Compliant Investment
certificates.
Source: GCC Sukuk: A Primer (2023)

Hence, the literature study gives useful insights into Sukuk Islamic securities, stressing the
intricacies, problems, and distinguishing characteristics of Sukuk structures. Shariah compliance,
risk management, and ownership are recurring elements that lead to a more sophisticated
understanding of Sukuk as a unique financial instrument. The observed gaps in the literature
indicate future study directions to address the dynamic character of Sukuk structures and the
regulatory influence on their performance.
The extensive theoretical research on Sukuk Islamic securities demonstrates the
expanding global importance of Islamic finance. Scholars have investigated many aspects of
Sukuk, emphasizing its distinctive features based on Sharia norms, including risk-sharing and
asset backing. Aleshaikh, Nourah, and Mohammad (2016) investigate concerns to recent Sukuk
issuances, emphasizing the significance of Sharia compliance while reducing agency costs. The
report promotes the concept of co-ownership to reduce agency costs and properly allocate risk,
underlining the difficulty of conforming to AAOIFI Shariah standards. The findings emphasize
the need for actual ownership in Sukuk structures, as well as Sharia compliance and rigorous risk
management for Sukuk's integrity and competitiveness in comparison to conventional bonds.
Furthermore, the discussion on securitization and asset-backed Sukuk by Abdullah Leslie
(2011) highlights the necessity of distinguishing between asset-based and asset-backed Sukuk for

13
Sharia compliance and risk management. Asset-backed Sukuk, which involves the selling of
underlying assets, adheres to Sharia principles of ownership and risk-sharing, separating it from
traditional bonds. Tamweel's asset-backed Sukuk is highlighted as a Sharia-compliant strategy in
the report, emphasizing the importance of true ownership and risk exposure to asset
performance.
In contrast, Muhamed and Radzi (2011) discuss concerns and obstacles in Sukuk
issuance, demonstrating the influence of the 2008 global economic crisis on the Sukuk market.
The drop in issuance has been linked to a variety of issues, including economic downturns,
falling oil prices, and decreased investor confidence. The study emphasizes that, despite their
unique characteristics, Sukuk are vulnerable to hazards such as credit risk, casting doubt on the
premise that they are immune to global crises.
Finally, Yean's (2009) investigation of Shari'ah-related issues in Sukuk ownership
emphasizes the importance of conforming to Shari'ah norms to distinguish Sukuk from
conventional bonds. The AAOIFI's emphasis on confirmed asset ownership, transfer of
ownership, and asset retention by managers ensures Shari'ah compliance. Real-world examples,
such as the ECP Sukuk and Investment Dar, highlight the need of a real sale of assets and the
probable lack of priority for Sukuk holders in the event of default, strengthening asset-backed
securitization principles.
Despite these contributions (table 5), there are gaps in the literature, especially regarding
the dynamic nature of Sukuk structures and the impact of regulatory regimes. Disagreements
continue about the classification of certain Sukuk as actual risk-sharing instruments. Future study
should fill these gaps to provide a more nuanced knowledge of Islamic assets such as Sukuk.
Overall, the literature emphasizes the significance of Sharia compliance, true ownership, and
good risk management for Sukuk's legitimacy and competitiveness in the global financial scene.

14
 Table 5: Themes that are Presented in the Review Paper

Themes

1. Sukuk Structures and Shari’ah Compliance

2. Challenges and Decline in Sukuk Issuance

3. Ownership and Shari’ah Compliance

4. Enforcement and Regulatory Challenges (Figure 2)

V. Conclusion and Recommendation

5.1 Conclusion
In short, the substantial theoretical research on Sukuk Islamic securities indicates the expanding
global importance of Islamic finance. Scholars have thoroughly investigated many aspects of
Sukuk, emphasizing its distinctive Sharia-based characteristics such as risk-sharing and asset
backing. According to Aleshaikh, Nourah, & Mohammad (2016), Sharia compliant and effective
risk management are critical for Sukuk's legitimacy and competitiveness when compared to
conventional bonds. The discussion on securitization and asset-backed Sukuk by Abdullah Leslie
Terebessy (2011) emphasizes the importance of distinguishing between asset-based and asset-
backed Sukuk for Sharia compliance and effective risk management. However, as Muhamed and
Radzi (2011) indicate, constraints and hurdles in Sukuk issuance highlight the sensitivity of
Sukuk to different risks, including credit risk, undermining the premise of their immunity to
global crises.
Moreover, Yean's (2009) examination of Shari'ah-related difficulties in Sukuk ownership
emphasizes the need of adhering to Shari'ah principles in distinguishing Sukuk from
conventional bonds. Managers guarantee Shari'ah compliance by emphasizing confirmed asset
ownership, transfer of ownership, and asset retention. Real-world examples, such as the ECP
Sukuk and Investment Dar, highlight the importance of a legitimate asset sale and the probable
lack of priority for Sukuk holders in the event of default, strengthening asset-backed
securitization principles.

5.2 Recommendation for Future Research

15
While these studies have made significant contributions, there are still gaps in the literature,
particularly concerning the dynamic nature of Sukuk structures and the impact of regulatory
regimes. Disagreements concerning the designation of certain Sukuk as genuine risk-sharing
instruments should also be investigated further. Future study should fill these gaps, allowing for
a more detailed understanding of Islamic assets such as Sukuk. In practice, these findings
provide useful insights for policymakers, practitioners, and researchers working in the field of
Islamic finance.

5.3 Managerial Implication

This information can be used by policymakers to improve regulatory frameworks, practitioners
to improve risk management practices, and researchers to delve deeper into the identified gaps to
develop the theoretical underpinnings of Sukuk. In summary, this study provides a thorough
examination of theoretical research on Sukuk Islamic securities, emphasizing the need of Sharia
compliance, true ownership, and effective risk management for their legitimacy and
competitiveness in the global financial scene.

References

Abdullah (Leslie Terebessy), A. K. (2011). Overcoming the Weaknesses in Sukuk: Toward Risk-
Sharing Instruments in Islamic Finance. ICR Journal, 2(4), 669–690.
https://doi.org/10.52282/icr.v2i4.605

Abdo, A. (2014). A critical review of the Sukuk market: a qualitative study to identify current
risks and opportunities. http://hdl.handle.net/10788/1792

Abubakar, Y. S., Nafees, S. M., Dorloh, S., & Aji, R. H. (2023). The Concept of Sukuk and Its
Applications in Contemporary Islamic Financial System.

Adenigba, S. A., & Akorede, H. Y. (2023). Implications of Psychological Pricing on

Contemporary Muslim Retailers and Consumers in Nigeria. Journal of Islamic Economic
and Business Research, 3(1). https://doi.org/10.18196/jiebr.v3i1.93

Aleshaikh, Nourah,Mohammad (2016) A Critical Analysis of Asset-Backed Sukuk from Sharia

Perspective and Observed Risk Mitigation Process in Sukuk Structure: A Case Study in
Saudi Arabia. Doctoral thesis, Durham University.

16
Bakri, M. et al., (2020). Factors influencing spread in Malaysia securitization market.
Accounting, 6(4), 433-440

Deji, A., Khan, S., Habaebi, H.M., Musa. O.S. (2024). Technical Engineering Evaluations And
Economic Feasibility Study Of Solar Powered Air Conditioning System In Tier Three
Nations. Academy of Entrepreneurship Journal, 30(S1), 1-18.

Deji A., Khan S, and Mohammed H.H (May-June 2024). Renewable Energy Analysis and
Evaluation with Economic Utilization of Solar Powered Air Conditioning System in
Nigeria. International Journal for Multidisciplinary Research (IJFMR). 6(3) Page 1-14.
https://doi.org/10.36948/ijfmr.2024.v06i03.21582

Elfaki Ahamed, O.M.H., Musa O.S, Deji A., (2023). Factors Related to Financial Stress
Among Muslim Students in Malaysia: A Case Study of Sudanese Students. Academy
of Entrepreneurship Journal, 29(6), 1- 15.

GCC Sukuk: A Primer | Saturna Sdn Bhd. (n.d.). https://saturna.com.my/learn/white-papers/gcc-

sukuk-2nd-edition accessed 20th November,2023

Hanefah, M. M., Noguchi, A., & Muda, M. (2013). Sukuk: Global issues and challenges. J.
Legal Ethical & Regul. Isses, 16, 107.

Hanifah A. Musa, Abdulwahab Deji & Sherifah O. Musa (2023). The Adoption Of
Information System Technology In Piloting The Current State Of Health Institution In
Tier Three Nations. International Journal for Multidisciplinary Research Volume 5,
Issue 6, November-December 2023. https://doi.org/10.36948/ijfmr.2023.v05i06.8367

Ibrahim, M. H. (2015). Issues in Islamic banking and finance: Islamic banks, Shari’ah-compliant
investment and sukuk. Pacific-Basin Finance Journal, 34, 185-191.

Iqbal, Z., & Mirakhor, A. (2011). An introduction to Islamic finance: Theory and practice (Vol.
687). John Wiley & Sons.

Laiqkafana, A. Z, & Rozikan. (2023). Analysis the Impact of Islamic Leadership on the Islamic
Work Ethics of Pegadaian Syariah Employees. Journal of Islamic Economic and
Business Research, 3(1). Https://doi.org/10.18196/jiebr.v3i1.114

Musa Sherifah, & Che Mohd Salleh, Marhanum (2018). Proposing A Model for
Entrepreneurship Development: The Role of Entrepreneurs’ Cash Waqf
Intention. Journal of Islamic Monetary Economics and Finance, 4(1), 183 - 204.
https://doi.org/10.21098/jimf.v4i1.764

17
Kammer, A. (2015). Islamic Finance: Opportunities, Challenges, and Policy Options.
https://www.imf.org/en/Publications/Staff-Discussion-Notes/Issues/2016/12/31/Islamic-
Finance-Opportunities-Challenges-and-Policy-Options-42816

Muhamed, N. A., & Radzi, R. M. (2011). Implication of Sukuk structuring: The comparison on
the structure of asset based and asset backed Ijarah Sukuk. In International Conference on
Business and Economic Research (2nd Icber 2011).

Airgap, B., Arslan-Ayaydin, Ö., & Karan, M. B. (2021). Do Sukuk provide diversification
benefits to conventional bond investors? Evidence from Turkey. Global Finance Journal,
50, 100533.

Rattu, M. U. (2013). Exploring legal, regulatory and shari‘ah compliance issues in Islamic
financial instruments : derivatives and sukuk. Journal of Economics.

Sherifah Musa & Marhanum Che Mohd Salleh (2020). Cash waqf for Entrepreneurship
DevelopmentHandbook of Research on Theory and Practice of Global Islamic Finance
Pages 290-305. https://www.igi-global.com/chapter/cash-waqf-for-entrepreneurship-
development/247206.

Vishwanath, S. R., & Azmi, S. (2009). An overview of Islamic sukuk bonds. The Journal of
Project Finance, 14(4), 58.

Yean, T. W. (2009). Sukuk: Issues and the way forward. International Legal News, 6(2), 1-20.

A. A. Bahishti, “The Importance of Review Articles & its Prospects in Scholarly

Literature”,Extsv. Rev., vol. 1, no. 1, pp. 1–6, Sep. 2021.https://doi.org/10.21467/exr.1.1.4293

18