This thesis found that even when sukuk and conventional bonds have. Modern sukuk emerged to fill a gap in the global capital market. There are five important differences between sukuk and traditional bonds. Because sukuk are assetbased securities not debt instruments they fit the bill. Sukuk is an innovative debt security which is similar to the conventional bond with respect to cash flow and risk. China green bond market 2016 climate bonds initiative. The yield differential between green and conventional bonds. The sukuk are based on the underlying tangible assets that the spv has acquired rather than being debt securities, which is the case with the issuance of conventional bonds. Sukuk adhere to an islamic view of finance, avoiding riba generating money from money, i.
The last decade witnessed a wide expansion of islamic finance in middle eastern and southeast asian countries. Are islamic bonds different from conventional bonds. Difference between sukuk and conventional bond coursebb. Sukuk issues, which are islamic financial instruments structured to replicate the cash flows of conventional bonds, have notably proliferated, fuelling the debate on the similarity between islamic and conventional finance. What are green bonds world bank documents world bank group. Those indices cover the whole sukuk and bond malaysian market. Sukuk can resemble conventional bonds by some of its features, but it is technically neither debt nor equity. A stock market perspective article pdf available in journal of comparative economics 4. How sukuk islamic bonds differ from conventional bonds.
In other words, sukuk represent ownership in a tangible asset, usufruct of an asset, service, project, business, or. Islamic investors want to balance their equity portfolios with bond like products. Sukuk and bonds are two kinds of financial instruments. Resource upheld sukuk are such where a real deal has occurred and the spv controls the fundamental resource. Though a benefit based sukuk is a securitization of the advantages which is nearer in structure to a conventional bond. A comparative analysis of sukuk and conventional bonds. Instead, the sukuk alijarah structure uses the leasing contract as the basis for the returns paid to investors, who are the beneficial. Shareholder wealth perspective abstract this paper investigates whether the stock market reacts differently to the issuance of fixedrate sukuk as compared to fixedrate conventional bonds and hence, if there is a difference in the shareholder wealth effect of these two types of issuances. Traditional sources of capital for infrastructure investment governments and commercial banks are insufficient to meet capital requirements. Using an event study methodology on a sample of malaysian. Five important differences between sukuk and traditional.