Editing Sukuk (section)

==Principles==
Ali Arsalan Tariq states that Islamic finance—including sukuk—is based on a set of several prohibitions:<ref name=":0">{{Cite book|url=http://www.sbp.org.pk/departments/ibd/sukuk-risks.pdf|title=MANAGING FINANCIAL RISKS OF SUKUK STRUCTURES|last=Tariq|first=Ali Arsalan|date=September 2004|location=Loughborough University, UK|pages=9}}</ref>
# Transactions in unethical goods and services;<ref name=":0" />
# Earning returns from a loan contract (Riba/Interest);<ref name=":0" />
# Compensation-based restructuring of debts;<ref name=":0" />
# Excessive uncertainty in contracts (''[[Gharar]]'');<ref name=":0" />
# Gambling and chance-based games (''Qimar'');<ref name=":0" />
# Trading in debt contracts at discount, and;<ref name=":0" />
# Forward foreign exchange transactions.<ref name=":0" />
As Shari’ah considers money to be a measuring tool for value and not an [[asset]] in itself, it requires that one should not receive [[income]] from money (or anything that has the [[genus]] of money) alone, as this (simplistically, [[interest]]) is "''[[riba]]''", and forbidden.  From a Sharia perspective, certificates of debt are not tradable except at their par value (although a different view is held by many in Malaysia).{{citation needed|date=March 2017}}

While a bond is a contractual debt obligation of the issuer to pay to bondholders, on
certain specified dates, interest and principal; a Sukuk is a certificate giving Sukuk holders an undivided beneficial ownership in the underlying assets. Consequently, Sukuk holders are entitled to share in the revenues generated by the Sukuk assets as well as being entitled to share in the proceeds of the realization of the Sukuk assets.<ref name=sukuk.com-7>{{Cite web|url=http://www.sukuk.com/wp-content/uploads/2014/03/Sukuk-Structures.pdf|title=Sukuk. An Introduction to the Underlying Principles and Structure|date=June 2006|page=7}}</ref>

===Similarities with bonds===
* Sukuk and bonds are sold to investors who receive a stream of payments{{#tag:ref|an exception is the "zero coupon" bond or sukuk where there is no payout or coupon but the value of the bond/sukuk increases until maturity.<ref>{{cite web |url=http://www.investment-and-finance.net/islamic-finance/z/zero-coupon-nontradable-sukuk.html |title=Zero-Coupon Nontradable Sukuk |access-date=14 March 2017}}</ref>|group=Note}} until the date of the maturity of the sukuk or bond, at which time they get their original investment (in the case of sukuk a full payment is not guaranteed) back.<ref name="FJIFD2012:207-13">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:207-13</ref>
* Sukuk and bonds are intended to provide investment with less risk than [[Equity (finance)|equities]] (such as shares of stock) and so are often used to "balance a [[Portfolio investment|portfolio]]" of investment instruments.<ref name="FJIFD2012:208">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:208</ref>
* Both Sukuk and bonds must issue a disclosure document known as a [[Prospectus (finance)|prospectus]] to describe the security they are selling.
* To give investors an idea of how much risk is involved in particular sukuk/bonds, rating agencies rate the [[Credit risk|credit worthiness]] of the issuers of the sukuk/bond.<ref name="FJIFD2012:212-3">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:212-3</ref>
* Both sukuk and bonds are initially sold by their issuers. After that they (or some sukuk and bonds) may be bought and sold by brokers and agents, mostly on the [[Over-the-counter (finance)|over-the-counter]] (OTC) market, but are also available on some stock exchanges around the world.<ref name="FJIFD2012:211-2">[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:211-2</ref>

===Differences from bonds===
* Ownership: Sukuk should indicate partial ownership of an asset. Bonds indicate a debt obligation.<ref name=sukuk.com/><ref name=FJIFD2012:211>[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:211</ref>
* Compliance: The assets that back sukuk should be compliant with Shariah. Bonds need only comply with laws of country/locality they are issued in.<ref name=sukuk.com/><ref name=FJIFD2012:211/>
* Pricing: The face value of a sukuk is priced according to the value of the assets backing them. Bond pricing is based on credit rating, i.e. the issuer's credit worthiness.<ref name=sukuk.com/><ref name=FJIFD2012:211/>
* Rewards and risks: Sukuk can increase in value when the assets increase in value. Returns from bonds correspond to fixed interest.<ref name=sukuk.com/><ref name=FJIFD2012:211/> (Because most bonds' interest rates are fixed, most increase in value when the ''market'' interest rates fall.)
* Sales: When you sell sukuk, you are selling ownership in the assets backing them. (In instances where the certificate represents a debt to the holder, the certificate will not be tradable on the secondary market and instead should be held until maturity.)<ref name="Paldi-4">{{Cite web|url=https://www.slideshare.net/CamillePaldi/the-history-of-sukuk|title=History of Sukuk|last=Paldi|first=Camille|date=19 October 2014|publisher=FAAIF|page=4}}</ref> The sale of bonds is the sale of debt.<ref name=sukuk.com>{{cite web| url=https://www.sukuk.com/education/important-differences-sukuk-traditional-bonds-2207/#sthash.Z2xL87B0.dpuf |title=Five Important Differences Between Sukuk and Traditional Bonds |last1=Mohammed |first1=Naveed |date=26 July 2014 |access-date=14 March 2017 }}</ref><ref name=FJIFD2012:211/>
* Principal: Sukuk investors (in theory) share the risk of the underlying asset and may not get all their initial investment (the face value of the sukuk) back. (The value payable to the Sukuk-holder on maturity should be the current market value of the assets or enterprise and not the principal originally invested, according to Taqi Usamani.)<ref name="MTUS2007:3-4">[[#MTUS2007|Usmani, ''Sukuk and their Contemporary Applications'', 2007]]:3–4</ref> Bond investors are guaranteed the return of their initial investment/principal.<ref name=FJIFD2012:210>[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:210</ref> In practice some sukuk are issued with repurchase guarantees.<ref name=FJIFD2012:210/>
* Conventional bonds are issued with underwriters. Sukuk underwriters do not usually conduct the issuance and may not be required. Sukuk use Special Purpose Vehicles to be the trustee/issuer of the sukuk.<ref name=FJIFD2012:214-5>[[#FJIFD2012|Jamaldeen, ''Islamic Finance For Dummies'', 2012]]:214-5</ref>