Assalamu alaikum,

Fuad here,

Welcome to our latest newsletter, where we explore the benefits and differences between Islamic bonds (Sukuk) and traditional bonds. As you may know, Sukuk are structured to comply with Islamic law and are becoming increasingly popular as an ethical and socially responsible investment alternative to traditional bonds.

Here are some of the key differences and benefits of Sukuk compared to traditional bonds:

1. Ethical investment: Sukuk are structured to comply with the principles of Islamic law, which prohibits the charging or paying of interest (riba). Instead, Sukuk offer returns in the form of profit-sharing based on the performance of the underlying asset. This makes Sukuk an attractive ethical investment option for those who seek to align their investments with their values.
   
   

2. Asset-backed: Sukuk are typically backed by tangible assets, such as real estate or infrastructure projects. This provides greater transparency and reduces the risk of default compared to traditional bonds, which are often backed by the issuer's creditworthiness.
   
   

3. Risk-sharing: Unlike traditional bonds, where the investor assumes no risk, Sukuk investors share in the risk and reward of the underlying asset. This aligns with the principles of Islamic law, which encourages risk-sharing and discourages excessive speculation.
   

4. Structures: Sukuk can be structured in a variety of ways, including lease agreements (Ijarah), partnership agreements (Musharakah), and sale contracts (Murabahah), among others. This allows for greater flexibility and customization to meet the specific needs of investors and issuers.
   

5. Global market: The Sukuk market has grown rapidly in recent years, with increasing demand from both Islamic and non-Islamic investors. According to Bloomberg, the global Sukuk market was worth $539 billion in 2020, and is expected to continue to grow in the coming years.

In summary, Sukuk offer a unique and ethical alternative to traditional bonds, providing investors with the opportunity to invest in socially responsible and asset-backed projects while also sharing in the risk and reward of the underlying asset.

If you're interested in investing in Sukuk, there are several ways to do so. You can invest directly in individual Sukuk issues or invest in Sukuk funds, which offer a diversified portfolio of Sukuk investments.

As always, we encourage you to do your own research and consult with a financial advisor before making any investment decisions.

Thank you for reading, and we hope you found this newsletter informative. Stay tuned for our next edition, where we will explore other topics in the fascinating world of Islamic finance.

Until next time Assalamu alaikum,

Fuad Z. Al’Rafei