Sukuk

Sukuk (صكوك) are defined by the AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) as "securities of equal denomination representing individual ownership interests in a portfolio of eligible existing or future assets." They were developed as a Sharia-compliant alternative to conventional bonds, which are prohibited under Islamic law because they pay interest - known as Riba. The Fiqh Academy of the OIC legitimised the use of sukuk in February 1988.\n\nInstead of lending money in exchange for interest, a sukuk holder owns a proportional share of a real asset - such as a property, infrastructure project, or business activity. Returns are generated through rental income, trade profits, or profit-sharing arrangements tied to that asset's performance. A Special Purpose Vehicle (SPV) is commonly used to hold the underlying asset on behalf of investors.\n\nThe global sukuk market entered 2026 with strong fundamentals, according to Fitch Ratings, which notes that sukuk represented approximately 16% of all US dollar debt capital market issuance in 2025 (excluding certain categories). The market is also evolving: digital platforms and retail sukuk programmes - particularly within the UAE and GCC - are expanding access to investors who were previously excluded from institutional-grade issuances. ESG-linked and sustainable sukuk are a growing segment, with the global ESG sukuk market expected to exceed USD 60 billion by 2026.

For English-speaking expats based in the GCC, sukuk are relevant both as a fixed-income alternative and as a way to align a portfolio with Islamic finance principles. Retail access has historically been limited to institutional buyers, but digital fractionalisation platforms operating in markets such as the UAE are changing that. Expats should verify that any platform offering sukuk is regulated - in the UAE, look for authorisation from the DFSA (Dubai Financial Services Authority) for DIFC-based firms, or the relevant mainland regulator.\n\nFor expats seeking passive exposure, sukuk ETFs offer a lower-cost route than individual issuances. Structures available on international platforms include UCITS-domiciled funds, which carry the regulatory protections of the FCA framework and are generally more accessible to GCC-based retail investors than US-listed alternatives. As with any fixed-income instrument, check the fund's ongoing charge figure, the credit quality of the underlying assets, and whether the structure has been independently certified as Sharia-compliant by a recognised Sharia supervisory board.