What Problems The Sukuk Market Faces
Islamic finance has successfully managed to keep its chin up due to iron will and
skills of leadership and management of Islamic economic managers despite lack of or insufficient state supports on its back. It is getting momentum all over the world. It is very encouraging that Islamic finance is winning the trust of the financial managers not only among Muslims and but also among the non-Muslims countries, financial institutions, companies, too, and of course among the Muslim masses. Some large business institutions in the countries like UK, USA and Japan invested in the Islamic Sukuk bonds issued by Dubai in 2006. Some UK companies have opened Islamic banking windows and Islamic brokerage desks to liquidate the UK markets for Islamic bonds; they enhance the secondary markets and support Sukuk bonds along with conventional bonds.
The UK treasury has passed legislation for Islamic finance. This shows that even outside the Muslim world, the people feel comfortable with Islamic finance. If Islamic finance is institutionalized in more organized way it can provide a formidable alternative to interest-based monetary system, which plays havoc with the world economies off and on.
The innovation of Sukuk has been proven to be a great instrument to enhance Islamic finance all over the world. Sukuk is an alternative to conventional bonds, which avoid Riba (interest or Usury) and confirms clarity of transaction. Investment through Sukuk bonds, since its inception, is rapidly increasing, which indicates the interest and trust of the Muslim masses in the Islamic finance.
But there are some problems which impedes the growth of Sukuk bonds up to the desired level. In this treatise we try to discuss these problems and find out possible solutions.
There is an absence of uniformity across the Islamic and non Islamic countries regarding the Islamic principles dealing with Sukuk bonds. For example, a somewhat liberal form of Sukuk in Malaysia or Indonesia may not be acceptable to stricter schools of thought of Middle East, India or Pakistan. So due to lack of clarity that what type of Sukuk is being used and what principles are working behind the Sukuk, make its penetration in the masses cumbersome.
Another problem is lack of liquidity of secondary market for Sukuk. Major rating agencies do not rate Sukuk. Sukuk experiences delay and the investors have to wait. This made it less attractive to investors.
The third problem is that Islamic scholars are not very well aware of the modern Islamic and conventional finance. They prone to avert the modern innovative ideas of Islamic finance and hence the masses who follow them refrain from investing through Islamic finance.
These issues need to be addressed by the respective parties: Islamic governments, Islamic scholars, and bankers of Islamic banks, interested investors among Muslims and even among non Muslims.
It is fortunate that institutions like Islamic Fiqh Academy, Madina Institute for
Leadership and Management, Mohammed bin Rashid Al Maktoum Foundation; Fiqh Academy India etc are working to resolve these problems and also to provide programs on leadership development to produce leaders to run Islamic financial institutions in the real world. Mulana Taqi Usmani is another leading name in promotion of Islamic finance. He, with his disciples, is working very successfully to spread awareness of Islamic finance among scholars and Muslim masses and leadership development programs. He has produced some eminent leaders who are running institutions of Islamic finance with success. Meezan Bank is an example.
The above mentioned details illustrate that Islamic finance has become a reality. The principle underlying Islamic finance like prohibition of Riba (Interest or usury) and absence of Gharar (ambiguity or uncertainty) has attracted the world of economics and finance. It is high time to make most of it. Islamic scholars with traditional and modern knowledge are direly needed. The government of Muslims countries should launch knowledge sharing training program and establish platform to discuss and promote knowledge of Islamic finance and its problems.
Moreover, educational and
leadership development programs to prepare leadership and management to actually run the Islamic financial institutions must be in high focus.
by: Anna Williams
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