Back to basics: Shari’ah principles

Shari'ah requires that financing should only be raised for trading in, or construction of, specific and identifiable assets. Trading in 'indebtedness' is prohibited, so the issuance of conventional bonds would not be compliant as they are usually traded and represent interest-based funding for general corporate purposes. A non-interest bearing loan, however, could be traded if priced at par value.

All sukuk (bond) returns and cashflows should be linked to assets purchased, or those generated

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