Sukuk in 2024 is by definition an Islamic bond and refers to a financial certificate that represents a proportionate ownership in a tangible asset, usufruct, service, or investment project, structured in compliance with Islamic Shariah law, which prohibits the payment or receipt of interest.
Sukuk is designed to generate returns to investors without contravening Islamic principles, primarily through asset-backed or asset-based structures, allowing for the sharing of profits and losses from the underlying asset or venture.
Sukuk, unlike conventional bonds that signify a debt obligation, signify ownership in an asset, project, or business, with returns derived from the actual economic activity generated by the asset rather than fixed interest payments.
Each Sukuk certificate gives the holder a share of ownership in the underlying asset, entitling them to a portion of the earnings generated by that asset, which can be in the form of rental income, profits from sales, or other income reflective of the asset's performance.
By providing an ethical investment framework, Sukuk serve not only as a financial instrument but also as a means of promoting sustainable and socially responsible investment practices in line with Islamic ethical considerations.
The diversity of Sukuk structures caters to various financing needs and investor preferences, encompassing real estate, infrastructure projects, and sovereign financing, among others, demonstrating the flexibility and adaptability of Islamic finance solutions.
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