Why the Issuance of Sukuk Bonds Have Declined?

Although Islamic banking and finance have flourished in many markets, this year we all witness the downfall of the issuance of Sukuk/ Shariah-compliant bond) from around US$ 45 billion in 2007 to only about US$ 15 Billion in 2008.

The leading reason behind the fall of Sukuk’s issuance is the debates on the status of such Sukuk, or whether Sukuk issued in the world have actually comply with Islamic or Shariah law. According to Sheikh Muhammad Taqi Usmani, chairman of the Board of Scholars at Bahrain-based AAOIFI, told Reuters that about 85 percent of Sukuk did not comply with Islamic law because of the repurchase agreement transactions.

Commented about the statement, Mr. Mohamad Nedal Alchaar, Secretary General of AAOIFI (Accounting and Auditing Organizations for Islamic Financial Institutions) said “The stetements that were made by our Shariah Chairman about the status of Sukuk compliance have wrecked the market”. He reiterated that; “The market was halted and still, we have not completely cleared ourselves from the negative consequence”.




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