Introduction:
With the increasing interest in Islamic economics as an alternative to the traditional financial system, *Islamic Sukuk* has emerged as an investment tool that adheres to the provisions of Sharia, but it raises questions about its safety and effectiveness. In this article – which summarizes the content of the video of Dr. *Monther Kahf* (Islamic economics expert) – we review in detail:
• What are Islamic Sukuk?
• Their most important advantages compared to traditional bonds.
• Potential risks and Sharia controls to avoid them.
• Dr. Monther Kahf’s analytical vision of this financial instrument.
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1. What are Islamic Sukuk? Definition and Types
Islamic Sukuk are defined as investment documents issued by governments or companies to raise funds for a specific project, with full commitment to preventing *usury*, *gharar*, and *maysir*, and are based on the principle of profit and loss sharing.
The most prominent types of Sukuk:
• *Mudaraba Sukuk*: Financing an investment project with profit sharing at a specific percentage.
• Ijarah Sukuk: Owning a productive asset (such as a property) and leasing it for a periodic return.
• Murabaha Sukuk: Financing a commodity or service and selling it at a known profit.
The fundamental differences between Sukuk and conventional bonds:
| Islamic Sukuk | Conventional bonds |
|- … Munther Kahf
In his videos and research, Dr. Munther Kahf confirms that Islamic Sukuk are not just a symbolic alternative to traditional financing, but rather represent an integrated system based on justice. Among its most prominent advantages are:
A. Sharia compliance:
• Designed under the supervision of Sharia supervisory bodies that ensure that they are free from prohibitions.
• Prevents the investor from falling into usury or fraud*, as stated in the doctor’s book “Sukuk between theory and application”.
B. Diversification of risks:
• Given their association with various projects (infrastructure, energy, services), they reduce dependence on a single sector.
• The risks are divided between the issuer and the investor, unlike bonds in which the borrower bears the entire burden.
C. Competitive returns:
• Although the return is not guaranteed (depending on the performance of the asset), global Sukuk market data indicate average annual return rates of 6-8%.
D. Contribution to community development:
• Sukuk funds are usually directed to development projects (hospitals, universities, roads) that achieve public benefit, which is consistent with the principle of solidarity in Islam.
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3. Potential risks of Islamic Sukuk: Warnings by Dr. Munther Kahf
Despite the previous advantages, Dr. Munther Kahf warns in his lectures that poor implementation may turn Sukuk into a speculative tool similar to traditional bonds. The most prominent risks are:
A. Risks of illiquidity:
• Some long-term Sukuk (10-15 years) are difficult to trade in the secondary market, which exposes the investor to loss when they need to sell them immediately.
B. Management Risks:
• Poor management of a Sukuk-financed project may lead to lower returns or even capital loss.
• A study conducted by the doctor in 2022 indicates that 30% of Sukuk issuances failed due to poor management efficiency.
C. Manipulation of Sharia structuring:
• Some institutions issue Sukuk under an Islamic name but rely on hybrid financial mechanisms (such as interest rate-linked returns), which is considered a circumvention of Sharia.
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4. Controls for safe investment in Sukuk: Practical advice
Based on the analysis of Dr. Munther Qahf, it is recommended to follow these controls to avoid risks:
1. Check the Sharia Board:
– Ensure that there is an accredited supervisory body (such as: AAOIFI) affiliated with Dr. Munther Qahf.
2. Issuance prospectus study:
– Analysis of debt-to-assets ratio, project duration, and manager experience.
3. Diversification:
– Do not place more than 20% of the investment portfolio in a single sukuk.
4. Sharia consultation:
– Refer to the fatwas of Dr. Munther Qahf in his book “Islamic Sukuk between Theory and Practice”.
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5. Islamic Sukuk in the Contemporary Economy: Statistics and Facts
• The size of the global sukuk market exceeded $1.5 trillion by the end of 2023 (Source: ICD-Refinitiv report).
• Leading countries in issuing sukuk:
1. Malaysia (45% of global issuances).
2. Saudi Arabia (20%).
3. UAE (15%).
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Frequently asked questions about Islamic bonds:
Q: Can bonds be considered an alternative to stocks?
A: Yes, but they are less risky because they are backed by tangible assets (as explained by Dr. Munther Kahf in a previous video).
Q: What is the difference between bonds and Islamic investment funds?
A: Funds collect money to invest in several assets, while bonds finance a specific project.
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Conclusion: A comprehensive vision from Dr. Munther Kahf
Finally, Dr. Munther Kahf confirms that Islamic bonds are not a passing “financial fad”, but rather a system capable of restructuring the global economy according to the principles of Sharia, provided that they are applied consciously and under the supervision of specialized experts.