Corporate issued bonds actually do vary by jurisdictions, but in general are standardised debt obligations with clear legal precedents about ranking as a creditor in insolvency. The legal structure of Islamic Finance is not yet standardised and there is not much legal precedent in most jurisdictions.

For equivalent pay-off profile, the essential requirement for a Sukuk is that the substance of the transaction, financing, project, ongoing operations and contingency arrangements have been judged Sharia Law compliant by a suitable Islamic Scholar. There is no central bureau and different Scholars opinions may in practice carry different weight with investors.

The name "Sukuk" is just the document with which the issuer agrees the nature of their obligations with the investor, in the London market it is usual to reference English Law, I assume Middle East and Malaysia use national courts rather than Sharia courts. To facilitate a secondary market there are public listings of Sukuk on Malaysian and UK exchanges but volume is still very low. It is much more buy-and-hold than corporate credit.

The advantage of Sharia compliance is to attract Islamic institutional investors. The cost of structuring a deal to be compliant and operating it to maintain compliance can be quite high and this is where efforts are being made to improve certainty, standardise documentation and smooth out necessary operations (e.g. early versions required profit shares to be traded as commodity deals).

Beyond that every structure is different. The main classification of Sukuk apart from jurisdiction is by underlying structure. The method by which the profit share of a compliant business or investment is passed to the owner: e.g. mudaraba & musharaka for unsecured. There are I believe some asset-backed sukuk too.

Common stock and preferred stock with no "debt-like" features would probably be Sharia compliant anyway if the underlying business was. The Sukuk is to allow a 'partnership style' co-investment between unequal partners. Both carry risk, but the direct owner of the asset is just an operator while the financial partner is more arms length but contributes capital to the venture. Thus Sukuk has "debt-like" features from an economic risk perspective.

Hello james prichard

Thank you for being the first to respond and for your informative response

Hi Mohammed, Really we are working now on this subject, so if you have a time I can share you the results on May

Dear fellows, though Mr. Prichard has given detailed answer about Sukuk, bonds and shares, I would like to add some comments.  Simplicity, Sukuk is also called islamic bond. it differs from conventional bond in two ways. first, it is backed by some real asset and most used in project financing whereas conventional bonds are not backed by any asset. secondly, returns from sukuk are not fixed as in case of conventional bond. In case of modaraba and musharaka sukuk return varies and depend on profitability of the project. whereas in case of ijarah, istisna and salam sukuk, returns may be fixed or pre-determine but always backed by some real assets.

The substance of finance or financial system is to find reasonable solutions for existing practical problems. Both of these financial vehicles, conventional bonds and Sukuk, attempt to mobilize the funds from surplus spending units to shortage spending units. There are fundamental risk/return differences between the two.In the conventional bond the underlying asset is money (debt) and in the Sukuk the

underlying asset is indeed an asset.The two solutions are clearly not identical; the fundamental difference in their structure has great religious difference but virtually no financial differences. The conventional bonds are based on debt instrument while the Sukuk financing is based on equity method.

Dear pioneers

We found several features of Sukuk and other securities in this area and thank you all for cooperation.

I’d like to ask you to think that how exactly you will specify the price of Sukuk and other Islamic securitie?

I’ve invented a new model for pricing Islamic instruments such as Sukuk or other government securitie. A copy of my initial work is published in my page. It would be my pleasure if I recieve your comments.

I would like to ask what is the difference between Sukuk and Equity?

Sukuk is an instrument and means a credit certificate. The difference between Islamic and conventional bonds is that the Islamic instrument is a common property in assets or benefits and is therefore compatible with the Islamic economic norm that prohibits usury in ensuring stable returns regardless of profit or loss. Income of its owners against a particular trade or lease of an asset or other types of instruments available.