Investing in Sukuk Bonds: Comprehensive Guide to Shariah-Compliant Finance

Sukuk are often called Islamic bonds, but the label hides an important difference. A conventional bond is a loan that pays interest. A sukuk is a certificate that gives investors a share in an underlying asset, project or business activity, and the return comes from that asset, for example lease rentals or trade profits. This guide explains how sukuk work, the main structures, how individuals can invest, and the risks worth checking first.

How sukuk work

Islamic commercial law prohibits riba, usually understood as interest. A sukuk avoids it by linking investors to something real. In a typical deal, an issuer sets up a special purpose vehicle, the vehicle acquires rights to an asset or enters a Shariah-compliant contract, and investors buy certificates that represent shares in it. Periodic payments come from the income that asset or contract produces, and at maturity the issuer usually buys the asset back at an agreed price.

In practice, most sukuk today are what the market calls asset-based. The underlying assets comply with Shariah, but investors mainly rely on the issuer’s credit and its promise to pay, so the economics often look much like a bond. Asset-backed sukuk are different: investors take genuine ownership of the assets and bear their performance risk.

The main sukuk structures

• Ijarah (lease): investors own a leased asset, such as property or equipment, and receive rental income. Ijarah became the largest domestic sukuk structure in 2025, at USD 39.8 billion or 24.28% of domestic issuance, according to the International Islamic Financial Market (IIFM).
• Murabahah (cost-plus sale): based on the sale of goods at a disclosed markup, common in domestic markets such as Malaysia.
• Wakalah (agency): an agent manages a pool of Shariah-compliant, income-producing assets on investors’ behalf.
• Mudarabah and musharakah (partnership): investors provide capital to a venture and share profits at agreed ratios, with greater exposure to the venture’s performance.

How big the market is

The IIFM’s 15th annual Sukuk Report, released in September 2026, puts global sukuk outstanding at USD 1.015 trillion at the end of 2025, the first time the market has passed the trillion-dollar mark. Issuance in 2025 reached USD 262.9 billion, up 28.2% on the year. Sovereigns issued USD 137.5 billion, more than half the total, followed by quasi-sovereigns, financial institutions and corporates. Since 2001, Malaysia has been the largest issuer by far, followed by Saudi Arabia and Indonesia.

How individual investors can buy sukuk

International sukuk are mostly sold to institutions. Individuals usually get access in one of three ways.

Retail government sukuk

Several governments sell sukuk directly to citizens in small amounts. Indonesia’s retail sukuk series is one example: SR024, offered from 6 March to 15 April 2026, came in three-year and five-year tenors paying 5.55% and 5.90%, with a minimum purchase of IDR 1 million and monthly payments.

Saudi Arabia runs a similar programme called Sah, a government savings sukuk for Saudi citizens over 18. When details were published for the October 2024 issue, the minimum was SAR 1,000, the maximum SAR 200,000 per person, the tenor one year, and the return was fixed per issue and paid at maturity, with no fees.

Sukuk funds and ETFs

For investors outside those programmes, the simplest route is a fund that holds a portfolio of sukuk. Unit trusts in Malaysia and the Gulf do this, and exchange-traded funds such as HSBC’s Global Sukuk UCITS ETF track an index of US dollar sukuk. A fund spreads risk across issuers, but it adds fees, and its own Shariah board and screening process are worth reading.

Through a broker or private bank

Some brokers and private banks give wealthier clients access to individual listed sukuk. Minimum ticket sizes are usually high, and secondary trading can be thin, so this route suits investors who plan to hold to maturity.

Risks to check before you invest

• Credit risk: with asset-based sukuk, repayment depends mostly on the issuer, so the issuer’s rating matters as much as it would for a bond.
• Rate and price risk: fixed-return sukuk lose market value when prevailing rates rise, which matters if you need to sell early.
• Liquidity: many sukuk trade rarely, and spreads can be wide.
• Currency: a dollar or ringgit sukuk carries exchange rate risk for investors who spend in another currency.
• Shariah structure: read which contract is used and who approved it. Standards differ across scholars and jurisdictions.

The standards debate: AAOIFI Shariah Standard 62

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has been developing Shariah Standard 62, which would push the market toward asset-backed structures with a true sale of assets to sukuk holders. As of mid-2026 it was still in draft. Rating agencies have noted that genuine ownership would expose investors to the performance of the specific assets rather than mainly the issuer’s credit, and that governments may be reluctant to transfer ownership of strategic assets such as ports or utilities. Many observers expect a compromise built on clearer documentation and stronger Shariah governance rather than a full shift.

Bottom line

Sukuk let investors earn fixed-income style returns while staying within Islamic finance principles, and access is wider than it used to be through retail government programmes and funds. Treat a sukuk like any other investment: check the issuer, the structure, the currency and the exit options, and speak to a licensed adviser and a qualified scholar if you are unsure whether a product fits your needs.

Related reading: Malaysia’s return to the dollar sukuk market, S&P Global’s Islamic finance outlook for 2026 and 2027 and the IFSB’s Islamic Financial Stability Report 2026.

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