Sukuk gif
SOME CORE CONCEPTS
IN SUKUK, Part 1 Author: Mughees Shaukat , PhD researcher and Assistant Researcher in INCEIF & ISRA, Malaysia
Abstract: Some Core Concepts of Sukuk Part 1 discusses the major concepts of Sukuk practices and the steps which need to be imple- mented towards a humane econo- my. The article discusses the major differences between conventional bonds and Islamic Sukuk and the many identifiable features of Sukuk are outlined in this comprehensive
article.
Keyword: Islamic Finance, Sukuk, Islamic Bond, Conventional Bond, Islamic Financial Market Instru- ments, Capital Market
Insofar as a debt market obstructs equitable distribution of wealth and income, it must be constrained. Distancing sukuk from debts should be considered in this context. In this two part article we will be taking an in-depth look at some of the core concepts in sukuk. This first part will concentrate on comparing sukuk with the conventional bond whilst exploring the quandary of substance over form that so often occurs.
Towards a human economy: As hinted above, distancing sukuk from debt is also necessary for strengthening the link be- tween the real and financial markets. It is bet- ter for the economy to keep the financial sector following the real sector rather than the other way around. Finance is a facilitator for produc- tion, exchange and consumption of real goods and services that are our natural objects of de- sire. When financial growth itself becomes an object of desire, and production and exchange
of real goods and services becomes a means to that end, a great perversion takes place. Even though this kind of attitude towards finance is not universal, being confined to a section of the population who has the means to play the mon- ey game, the ruinous effects spread throughout the society affecting everybody. This tendency cannot be rooted out unless financial papers are restored to their natural status: representa- tives of real assets. Only then will the demand and supply of real goods and services, reflect- ing people’s tastes and capabilities, decide al- location of resources and, consequently, distri- bution of income.
As it stands now, under the aegis of debt-based, speculative finance, allocation of resources and distribution of income are vulnerable to manipulation of oligopolies and financial power centers. Financial papers often serve like gam- bling chips, once their link with the real econ- omy is loosened. A financial product’s claim of
2010 October Global Islamic Finance 23
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