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18.7.09

Moody's Report: The Future of Sukuk, Substance over form?

This is a link to a relatively recent publication from Moody's highlighting some of the issues in the Sukuk (in particular, how a whole swathe of the market was declared possibly haram, yet the market still lumbers on). This report highlights issues about Asset-Backed vs Asset-Based Sukuk, the fact that very few sukuk actually involve true sales or give sukuk investors any recourse (i.e., typically their claims will most likely be treated as pari passu with senior debtholders). This of course has severe repurcussions to actual ratings and window-dressing should make Shariah Compliance seem all the more questionable.

It speaks about AAOIFI standards, the question of legitimacy of purchase undertakings, and most importantly, whether the current debate and stalemate will jolt the market into an demand for actual compliance.

Definitely worth a read.

Thanks to Juweria Amin of IBFNet.
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