At the forefront of the Islamic finance industry, Malaysia has made great strides in developing its sukuk market. As one of the pioneers in the issuance of sukuk, Malaysia has established itself as a global leader in this field. In this guide, we will take a comprehensive look at sukuk Malaysia, including its history, characteristics, types, and the current state of the market.
History of Sukuk Malaysia
The sukuk market in Malaysia has a long and rich history, dating back to the early 1990s. The first sukuk issuance in Malaysia was made by Shell MDS in 1990, and since then, Malaysia has played a pivotal role in developing the sukuk market. In 2002, Malaysia issued its first sovereign sukuk, marking a significant milestone in the country’s sukuk market development.
Characteristics of Sukuk Malaysia
Sukuk Malaysia is similar to conventional bonds in terms of their function, but differs in their underlying structure. Sukuk are Shariah-compliant financial instruments that are structured to generate returns for investors without violating the principles of Islamic law. The most significant difference between sukuk and conventional bonds is that sukuk holders own an undivided interest in the underlying asset, rather than a debt obligation.
Types of Sukuk Malaysia
There are various types of sukuk that are available in Malaysia, including Mudarabah, Musharakah, Ijarah, and Wakalah sukuk. Mudarabah sukuk are structured as a profit-sharing agreement, where the issuer acts as a mudarib and investors act as rabb-ul-maal. Musharakah sukuk are structured as a joint venture agreement, where the issuer and investors share the risks and rewards of the underlying asset. Ijarah sukuk are structured as a leasing agreement, where the issuer leases the underlying asset to the investors, who receive rental income from it. Wakalah sukuk are structured as a trust agreement, where the issuer appoints a trustee to manage the underlying asset on behalf of the investors.
Current State of Sukuk Malaysia Market
The sukuk market in Malaysia has experienced tremendous growth over the years, with total outstanding sukuk issuances in Malaysia reaching RM 940 billion as of 2022. The Malaysian government continues to play a pivotal role in the sukuk market by regularly issuing sovereign sukuk. The private sector has also been actively issuing sukuk, with many of Malaysia’s largest corporations opting to finance their projects using sukuk.
In conclusion, Sukuk Malaysia has come a long way since its inception in the early 1990s. Malaysia has played a pivotal role in developing the sukuk market, and its commitment to Shariah-compliant financial instruments has made it a global leader in Islamic finance. With a range of sukuk structures available, investors have a variety of options to choose from. The market for sukuk in Malaysia is expected to continue to grow, and investors are encouraged to explore this promising asset class.