The case for receivables-based Sukuk : convergence between the Malaysian and global Shariah standards on Bay al Dayn ?

Abstract EN

The Sukuk market has been an innovative market, with Sukuk structures evolving from “asset-backed” to “asset-based” and from “blended-assets” to “asset-light” structures.

New Sukuk structures were introduced mainly to solve the key problem faced by issuers who lack suitable Shariah-compliant physical assets to support their Sukuk issuance.

This paper focuses on the “blended-assets” Sukuk known as Sukuk al-wakalah, a type that blends different types of physical assets and receivables.

Whilst the Malaysian fuqaha (jurists) have allowed the sale of Sukuk having 100% receivables, the fuqaha from the rest of the world have only permitted the sale of Sukuk having substantial physical assets.

This paper therefore discusses the fiqh (juristic) analysis behind the requirement of having a minimum threshold (either 51%, 33% or 30%) of physical assets for Sukuk issuance and trading purposes.

The paper poses the question of whether the threshold of physical assets can be further reduced to 10%.

In particular, it examines the issue of whether trading of a Sukuk representing 90% receivables and 10% physical assets is permissible under the Shariah.