Asset-based vs Asset-backed Sukuk

Abstract

Sukuk are Islamic certificates of investment. They signify co-ownership of productive resources, known as the underlying assets. Because income to sukuk holders is generated by trading or real investment rather than mere lending, sukuk holders earn profit rather than interest. As co-owners of productive assets, sukuk holders face the risks of ownership. In particular, they face the risk that their assets may not generate profits or may even incur losses. They also face the risk that the assets may be damaged or destroyed completely.