In 2016, total new sukuk emissions amounted to some $75 billion, which, despite difficult economic conditions in some core markets, showed weak growth compared to the previous year. However, in terms of economic impact, the answer is probably yes. Sukuk, as described in AAOIFI`s Sharia Standard 17, are “equivalent certificates that constitute an interest in an underlying physical asset, a usufruit or a service or (property) of the assets of a specific project or investment activity.” Theoretically, the repayment of a sukuk is linked to the return generated by the wealth, project or investment activity that is the basis of the Sukuk certificate. While an investor perceives credit risk on the creditworthiness of the issuer under a conventional bond, his exposure in a sukuk is consequently opposed to the performance or activity in which sukuk holders participate because of their ownership in the sukuk. As in the case of a bond issue, a paying agent, a transfer agent and possibly a registrar are appointed to manage payments and transfers of sukuk instruments. Most sukuk are issued as global certificates, with the custodian (usually a custodian bank such as BNY Mellon or Citi) sometimes acting as a paying agent. Transfers are recorded through sub-accounts with a countervailing agent (for example. B Euroclear or Clearstream), but a separate register can also be kept by a registrar in case of registered Sukuk certificates. A common misunderstanding about Sukuk is that they are debt-backed securities that allow investors to directly use the underlying assets. Although sukuk is a stake in the underlying assets, they are structured so that the assets are resold to the initiator in the event of a default under a business entity; a right to assets is therefore replaced by a right to exposure against the initiator. Therefore, the ultimate risk is for both Sukuk and conventional obligations against the initiator/issuer. However, some sukuk have been presented as asset-backed instruments, with Nakheel, East Cameron Partners and the Pakistan Sukuk Highway being the largest.
The vast majority of Sukuk issued in recent years are asset-based, with investors not using the underlying assets in the event of default. Sukuk, known as Islamic bonds, has in recent years become synonymous with Islamic finance. The first modern Sukuk was issued in 1990 by Malaysian Shell MDS Sdn Bhd worth RM 120 million. This followed the first $150 million international sukuk from another Malaysian company named Kumpulan Guthrie Berhad in 2001 and a $600 million sukuk by the Malaysian government in 2002.