Sukuk : financial instruments under Islamic law

Sukuk are the most widely used Islamic financial instruments, which have become the key pattern and benchmark of Islamic finance. They are financial instruments that are backed by assets (not merely debts as in conventional securitization structures). Almost all sukuk offered up to now have been of the type resembling bonds. Basically, sukuk are debt securities that are compliant with the sharia, especially because the bonds issued are backed by tangible assets in the bond issuer. This article focuses on the workings of some of the commonly used sukuk and their interaction with the laws of countries outside the Middle East, especially in the area of taxation.