Sukuk Securities: New Ways of Debt Contracting

Preface

This book is about an emerging financial market that promises to provide effective funding for production activities under a set of safe risk-sharing and profit-sharing finance principles built into the design, and trading of a wholly new form of fixed-income securities called sukuk. In a speech on October 13, 2013, announcing new laws to get London to join sukuk trading, British prime minister David Cameron said that the new investments are possible “because of the unique openness of the city of London and because of our commitment to help London lead the way in Islamic finance across the world, just as it has led the way in global finance across the ages.”

Sukuk contracts are based on an entrepreneur and a financier taking a business risk together and sharing the profits while being prepared to incur losses together if the venture goes bust. The sukuk securities market is found in 12 countries, as of 2014. Sukuk trading started in 1998 on a small scale and has grown to its present size of close to US$1.2 trillion. When fully developed, it offers an alternative mode of fund-raising for all users of funds as long as the specific needs are taken into account and a sukuk contract is provided that meets those needs.

There is no literature dedicated solely to introducing these revolutionary securities markets to the readers in a comprehensive manner or, equally important, to providing a technical introduction to market players to what is described by the financial press ...