Perpetual Sukuk: A Preliminary Shari’ah Assessment

ISBN/ISSN: 0128-1976 (Printed) | E-ISSN 2289-4365
Pages: 207
Year: 2016

This publication is part of the journal ISRA International Journal of Islamic Finance (English Journal) (2016-1)

Perpetual sukuk are among the latest innovative instrument in the Islamic capital market. The introduction of this instrument has been driven by its commercial advantages as well as new regulatory requirements particularly in the financial sector. Perpetual sukuk have distinctive features compared to common sukuk for the instrument carries no maturity date and is typically treated as equity (from an accounting standpoint) rather than debt. While this innovation is commendable, it deserves Shari‘ah consideration of some of its structural and operational aspects. This paper attempts to analyse selected issues and highlight justifications provided by respective Shari‘ah advisers in approving perpetual sukuk. The paper begins with providing an overview on perpetual sukuk, its common features and basic requirements and its specific characteristics when issued as Additional Tier 1 (AT1) capital instruments by financial institutions to meet capital requirements under Basel III. Subsequently, the paper illustrates selected structures of recent perpetual sukuk issued in Malaysia and other countries. Finally, it highlights some potential Shari‘ah issues that might arise and deliberates upon them from the Shari‘ah perspective. The discussion and analysis of most of the Shari‘ah issues in this paper are, however, neither conclusive nor exhaustive.

Keywords: Perpetual sukuk, Shari‘ah, Basel III.



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