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Sukuk is an Arabic word and plural of a word Sakk. It signify legal instrument, deed or Cheque. It is an Arabic name for a financial certificate which can be taken similar to Bond.

Islamic Jurisprudence
Sukuk A financial product that develop input methods for capital resources. It structure and engineered Islamic financial products bases of output

Fixed and guaranteed Income or interest bearing bonds are not permissible in Islam. Sukuk are securities Meeting terms of Islamic Financial law and investment principles which prohibits charging, paying interest & involvement of Riba.

Sukuk is a Financial Assets Act in accordance with with Islamic law and Classified in accordance with their tradability and non-tradability in the secondary markets


is non debt base instrument which is opposite to the bond and debenture and does not have means to guarantee the return, non trade-able, non transferable, non-cashable prior to the maturity, non-collateralize, issued under equity participation in favor of original investor of specific purpose, period, value and volume with the condition of profit and loss participation and investor and seller identity disclosed.

Islamic Investment Principles (IIP)

IIP is the part of Shariah, Indirectly to be an Islamic Law. It is extensive to law as it cover general body of spiritual and moral obligations and duties in Islam towards economic, financial and social affairs in the commerce & trade. Sukuk is structure and issued under IIP with the purpose to structure the capital base of the project &transaction under equity participation.

A time-honored instrument for a contemporary use In post Islamic era Sakk which are now called Sukuk were similar with Conventional Cheque. A document representing a contract, Conveyance of rights, obligations or financial transaction in conformity with the Shariah.

Sukuk has a great potentiality in transforming assets future Cash Flow into present cash flow. Sukuk is an input for the financial output
Practical evidence in archives indicate Sukuk as a product extensively used during medieval Islam for transferring financial obligations Originating from trade and other commercial activities.

Sukuk may be issued on existing as well as specific assets that may become available at a future date. Sukuk is the key to structure capital as well cover the liquidity requirement for permanent or temporary requirement

The need for tangible assets

Shariah Rule
Financing should only

be raised for purpose specific and identifiable which must have the Economical and social viability. Transaction under indebtedness are prohibited as a result conventional bonds or debenture are not permitted. Sukuk returns and cash flows are linked to transaction workout Net Profit of transaction without any guarantee of return.

User of funds need to utilize financing along with contributing its equity in transaction. Contribution of Equity is the share of risk that user confirm in the transaction . Sukuk funds are Equity of Sukuk owners that form into finance or funds for venture Shariah accept with risk and return guideline of Islam.


Pakistan Cotton Trading Ltd.
Subscription Amount Equity Participation

Rs.100,000,000 20:80 Yousuf Ibnul Hasan

Issued For

Balancing , Modernization & Replacement

Issued 1st June 2011 to 31st December 2012

Non- Transferable, Non-Endorsable, Non-Cashable, Non Collateralize


Problem with interest or Riba

Shariah Rule for Money

Money is

considers as measuring tool for

value. Money is not a commodity. Money cannot be bought and sold in similar quality. Money to remain in circulation and cannot to be stagnant or in holding

Money must have support of equal value with authentication. Money issuance on goodwill is an artificial value and such issuance is just a paper printing. Money requires to be utilized to receive income or anything that has the type of money alone. Money in exchange of money in similar quality is Interest a price of Money which is Riba.

Implication for Islamic financial institution is trading and financing, receivables for anything other than equality. Conventional loan, lending, borrowing or debt base plastic currency are not permissible.

Problem of uncertainty Garrar

Ambiguity in contractual terms or uncertainty in existence of an original asset consider as unoriginal. Shariah add in the concept of Public benefit, that, overwhelmingly in the public good may yet be transacted Hedging or mitigation of avoidable business risks, may fall into this category of Garrar but there is still much discussion yet to come.

(8) P- Formula
Financing is only be made available with clear understanding of Person, Purpose, Product, Project, Period, Performance, Process =

Profit And acceptance of Loss

Declaration of Results
Financing is made available on 8 P formula Financing to be in clear confirmation: Term and condition to pre-agreed Duties and Responsibilities to define Decision to be witness by active witnesses Arbitration to be integral part of agreement Agreement to be made by third person. Monitor to be external body.

All matters to be in writing

Sukuk for Financing

Sukuk is the source of financing Sukuk is the source for structuring Capital Sukuk is encouragement of saving conduct Sukuk is a trading instrument without excess to the face value Sukuk is specific and in general. Sukuk must be in clear period and validity. Sukuk return are declared on maturity.

Sukuk are widely regarded as controversial due to their visible purpose of evading limits on Riba

Traditional scholars do not believe that this is effective, referring to the fact that Sukuk requires payment for Time Value of Money
This consider as the basic application of


Present Sukuk offer fixed and guaranteed rate of return on investments, similar to interest and it is risks free of particular venture for which Sukuk were issued. In reality banks invest in assets and return from investment is spread over the period. This flow of income is "fixed" and Rate is pre declare without utilization of investment amount which given to investors.

There is an asset in the background. There is more security for the investor. This security makes Sukuk increasingly appealing to global investors including Muslims and non-Muslims.
The soul of the Sukuk is not what is been practice and the return is simply an Interest which deviate the principal of participation.