Sukuk vs Conventional Bond Analysis

Sukuk are Shariah-compliant financial certificates, often described as "Islamic bonds." Unlike conventional bonds where investors lend money for interest payments, sukuk represent fractional ownership in a tangible asset, usufruct, or service. Returns are generated through profit-sharing rather than interest (riba), which is prohibited under Islamic law.

Key structures: Ijara (lease-based), Murabaha (cost-plus financing), Wakala (agency), and Mudaraba (profit-sharing partnership). Each structure offers different risk-return profiles and asset-backing requirements. The choice of structure affects how sukuk appear on balance sheets and their treatment in distress scenarios.

Sukuk ratio measures sukuk outstanding as a percentage of total liabilities, indicating the degree to which a company relies on Islamic vs conventional debt financing. A ratio above 50% indicates majority Shariah-compliant financing.

Why it matters: For Shariah-compliant investors, understanding a company's debt structure is essential for screening eligibility. Many Islamic indices require total conventional debt to remain below specific thresholds (typically 30-33% of market capitalisation). Tracking sukuk adoption also reveals broader trends in Islamic capital markets development across the GCC.

Balance sheet figures are reported in thousands of each company's reporting currency. Data is sourced from audited annual reports and exchange filings.