Islamic bond issuance: what sovereign debt managers need to know

Purpose - The most popular form of Islamic finance is commonly referred to as sukuk - wholesale, asset-based capital market securities. The purpose of this paper is to enhance the general understanding of essential policy considerations in the creation and development of sukuk markets. Design/methodology/approach - This policy paper reviews the key developments in the sukuk market and informs a debate about challenges and opportunities going forward. The paper presents a qualitative analysis of economic, regulatory and legal issues that warrant consideration. Findings - The paper finds that while the sukuk market continues to generate strong interest by new issuers in Muslim and non-Muslim countries alike, some critical constraints arising from continued legal uncertainty and regulatory divergences still need to be overcome. As issuers weigh the costs and benefits of sukuk issuance in a broad policy context, continued efforts will be required to overcome a series of economic, legal and regulatory issues. Originality/value - The paper presents, for the first time, a structured analysis of sukukmarkets aimed at identifying key considerations for sovereign debt managers, especially in non-Muslim countries.