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Submitted By acap10
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Sukuk can be defined as Islamic bond, it has been the most active Islamic debt market instrument. It is also known as the Islamic securities in the market today. Literally, Sukuk means certificates. Sukuk also can be defined as certificates of equal value that represent an undivided interest (proportional to the investor’s interest) in the ownership of an underlying asset (both tangible and intangible), usufruct, services or investments in particular projects or special investment activities.

Through this concept, sukuk enjoy the benefit of being backed by assets, thereby affording the sukuk holder or investor a level of protection which may not be available from conventional debt securities. Furthermore, unlike conventional debt securities that mirror debts or loans on which interest is paid, sukuk can be structured based on innovative applications of Islamic principles and concepts. Nonetheless, sukuk share some similarities with conventional debt securities, in that they are similarly structured based on assets that generate revenue. Each sukuk has a face value (based on the value of the underlying asset), and the investor may pay that amount or (as with a conventional bond) buy it at a premium or discount.

Modern day Sukuk have sorted out the original concept to create certificates representing undivided shares in the ownership of:
• Tangible assets
• Usufruct of an asset
• Particular projects or special investment activities.

Compared with the conventional bond, which only offer ownership of the debt, Sukuk is giving the investor a share of an asset with the appropriate cash flow and risk. Like the other securities, Sukuk is following the Islamic Law and sometimes referred as Shariah principles, which prohibit the charging or the payment of interest. Financial assets that comply with the Islamic law can be classified in accordance with their...

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