Personal Finance Term
Sukuk
A Shariah-compliant alternative to a conventional bond. Instead of paying interest, sukuk give investors a share of the income or assets behind the investment, making them suitable for those who want Islamic, fixed-income-style returns.
A conventional bond is a loan that pays interest, which is not permitted under Shariah, so sukuk are structured around ownership of real assets or a business venture, and investors earn returns from the income those assets generate rather than from interest. Malaysia is one of the world's largest sukuk markets, and sukuk are issued by the government and companies to raise funds, with returns and risk varying by issuer and structure.
For an investor, sukuk behave somewhat like bonds: they typically aim to provide steadier, more predictable income than stocks, making them useful for diversification and for the more conservative part of a portfolio. Individuals usually access sukuk through unit trusts, ETFs, or specific retail offerings rather than buying large institutional issues directly. As with bonds, the main risks are that the issuer could default and that prices can move with profit-rate changes, so the issuer's strength matters.