Development of Sukuk in the Middle East Research Paper

Development of Sukuk in the Middle East - Research Paper Example ure of Sukuk has been introduced and developed because the structure of payment of bond on the basis of western method is not allowed or permissible in Arabian countries. Sukuk establishes a relationship between the return and the cash flow from financing of the assets. The financing in case of Sukuk is applicable only in case of identifiable assets. The structure of Sukuk is developed in such a way that it provides adequate return to its investors without violating the rules and regulations of the Islamic law. There are varieties and different types of structure of Sukuk that is associated with the underlying asset. The most well known and familiar type of Sukuk is related to the partial ownership of the asset and it also includes the other types of bonds that is related or associated with the partial ownership of debt, business, project or investment. Sukuk can also be defined as the undivided shares that is related or associated with particular projects or special investment. The investor of Sukuk has common share that is related to the investment in the ownership of the asset but it does not represent or deals with the debt that is owed to the issuer of the instrument. During the period of classical reform of Islam the concept of Sukuk has derived from the word cheque which represents or signifies the document which resembles a contract or a right or obligation that is entered by the parties and it has been introduced complying with Shariah. The evidence resembles that Sukuk is used extensively during the Islamic period for transferring the financial obligations or liabilities that has originated from the trade and other commercial activities. The importance and the need or requirement for the use of Sukuk has increased gradually in the perspective of modern Islamic culture and it deals with the concept of monetization of the asset and it is commonly known as securitization of asset which is attained through the process of issuance of Sukuk. The potential