Global issuance of sukuks has grown rapidly since 2001, reaching $12.7 billion in 2006. However, the sukuk market faces several challenges for further development, including lack of a strong secondary market, few market makers, and need for standardization and harmonization across jurisdictions. Recommendations to address these challenges include establishing widely accepted accounting and reporting principles, continuing sukuk structure innovation, developing the necessary infrastructure to support secondary trading, increasing education and awareness, and defining the role of ratings agencies.

1. 1
SukuksSukuksSukuksSukuks: Development And: Development And: Development And: Development And
ChallengesChallengesChallengesChallenges
By,
Ijlal A. Alvi
Global Sukuk Issuance
Global Sukuk Issuance (Feb '06)
2,087
3,500
12,751
1,655
800
4,609
100
0
2000
4000
6000
8000
10000
12000
14000
2001 2002 2003 2004 2005 2006 Total
issued
Year
SizeinMillionUS$
Global Sukuk Issued

2. 2
Sukuk Development
Growth rate of Islamic Capital Market is
estimated to be 20%+ is expected to
maintain the rate in a foreseeable future
Sukuk primary issuance is phenomenal as compare to conventional
issuance e.g. Malaysia
Sukuks are now issued by Corporate sector for example DP World and
by many other by GCC corporate
Infrastructure projects are now looking at Sukuk as a source of
financing
Growing number of new Sukuk structures and acceptability of new
ideas by Shariah scholars
Sukuk has a potential to play a major role in the development of
Takaful segment of the industry
Sukuk Challenges
Non existence secondary market mainly due to the lack of critical mass.
What is the critical Mass required to stimulate trading?
Few or no market makers
Pricing the secondary market issues - area of inefficiency and
requires more transparency
Benching marking and absence of Islamic Yield
Curve which should have no relations to LIBOR
Limited awareness and flow of information
Standardization of Contracts & market
practices but keeping innovation alive
Usage of Sukuk as a monetary management
tool by regulatory bodies
Lack of Shari’ah harmonization
Lender of last resort

3. 3
Recommendations For
Way Forward
Formulation of widely acceptable and
appropriate accounting and reporting
principles
Continue innovating structures such as convertible feature
Establishment of regulatory framework
Development of infrastructure required for secondary market
including refining payment and settlement procedures
Allocation of funds and resources by the industry and
multilateral institutions for Research and Development
Awareness and understanding drive and widely available
information
Role of rating
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