Project Leader: Prof Mohamed Ariff Syed Mohamed
Islamic funding instruments such as sukuk offer a completely different and new way of debt contracting in comparison with traditional bonds funding development activities, as they relate to specific asset-backed funding by contracting targeted funding of an entity instead of general funding that embraces pro-growth set of ethical principles grounded on the Islamic teachings on financial trading. This new growing segment of sukuk bonds has attracted attention of professionals especially because it has chalked up an outstanding value estimated to be around USD 320 billion as at 2017 mostly in five financial centers: Malaysia, Indonesia, Saudi Arabia, United Arab Emirates and Bahrain (without considering Iran, with a big market for this form of funding). There are other 13 countries where one or more sukuk financial instruments are listed and traded in their respective national financial markets, an example being the London Stock Exchange. The London Stock Exchange listed its first sukuk instrument in August 2014, with the announcement made by the English Government of making London a leading center for this form of debt contracting. This paper shows that this new debt instrument is able to secure financial stability since the returns to investors in this form of lending are protected by asset backing and share in the risk of the project, and hence is a less risky mode of development funding with evidence of promoting financial stability.
Publications:
- Ariff, M., (2018). “A new form of global asset-backed debt market thorough sukuk” in Catellan, Valentino (ed) (2018). Islamic Social Finance: Entrepreneurship, Cooperation and the Sharing Economy. Published by Routledge (Taylor & Francis Group) London and New York.
