Search results

SRI Sukuk, with its outcome-based emphasis, aims to align the Islamic finance industry with its original ideals and address criticisms related to form over substance. In Malaysia, while the pioneering Sukuk Ihsan was a “social” sukuk, recent SRI Sukuk issuances have predominantly been “green” or “sustainable” sukuk. This paper aims to evaluate the Malaysian SRI Sukuk market, identifying factors favouring “green” sukuk. It also examines whether structural issues in Sukuk Ihsan deterred subsequent issuers from “social” sukuk. The emergence of SRI Sukuk responds to sustainable development goals and the shift towards a low-carbon economy. Sukuk Ihsan, as the first Shariah-compliant pay-for-success structure, poses complexity and risk management challenges to meet performance criteria.

The study used a qualitative method in the form of a critical review of literature, interview sessions with experts and stakeholders who are familiar with SRI Sukuk and Sukuk Ihsan and a case study analysis of Sukuk Ihsan.

The popularity of “green” sukuk reflects the growing global environmental consciousness. The main factors driving the popularity of “green” sukuk are the maturity of the market and the existence of a strong supporting infrastructure for “green” issuances while the positive profiling benefits and availability of incentives for “green” issuances also contribute to a lesser extent. The recommendations include the promotion of “social” sukuk by regulators through a focus on establishing a similar supporting infrastructure for “social” sukuk as there are for SRI and standard Sukuk. In addition, issuers of “social” sukuk may want to reconsider the inclusion of key performance indicators (“KPI”) into the structure of future “social” sukuk issuances.

Although all respondents considered Sukuk Ihsan to be a success, some potential areas of improvement were also noted. These include the structuring of future “social” sukuk issuances with a bigger discount to compensate for the additional risk being assumed by the investor; the need to be more careful in the KPI selection process; and one respondent even went so far as to suggest the possibility of totally removing the step-down feature of Sukuk Ihsan.

Industry implications of Sukuk Ihsan study include findings that require balancing disclosure and economics by providing additional disclosure requirements for SRI Sukuk that may pose risks without corresponding benefits for issuers. KPI selection and investor confidence should also be properly identified, as KPIs are essential for the pay-for-success model to work successfully. For sukuk holders, findings indicate that any approval for waivers during issuance can impact investor confidence negatively. Investor literacy and impact understanding should also be improved for social Sukuk success. Investors should understand the different risk exposures and evolving impact requirements vital for sustainable growth.

The findings provide significant implications for social impact Sukuk issuance. They include providing a substantial case study for future social impact issuances, based on the pioneering impact of Sukuk Ihsan. Furthermore, Sukuk Ihsan’s unqualified success validates the feasibility of socially responsible sukuk. Despite its early introduction, both tranches being fully subscribed reflects robust investor interest. Stakeholders were also proud of their involvement in such an initiative, viewing it as a significant achievement in creating societal impact.

Although there have been several prior studies done on Sukuk Ihsan, the focus of those studies was on its structure and the novelty of its “step down” returns structure where investors would receive lower returns if certain key performance indicators (“KPIs”) are met by Yayasan AMIR in the execution of its Trust School Programme. Bearing in mind that the first Sukuk Ihsan has a June 2022 maturity date, and the results of its KPIs were announced in December 2021, to the best of the authors’ knowledge, this is the only documented case study that comprehensively reviews Sukuk Ihsan and identifies lessons learned and/or opportunities for improvement for the benefit of potential SRI Sukuk issuers in the future.

The main objective of this paper is to analyze works of literature on SRI sukuk to highlight the potential for these kinds of instruments in financing more sustainable financial systems (SFSs). The analysis mainly accentuates a dearth of knowledge on the various challenges and opportunities in the realm of SRI.

This paper pioneers the bibliometric and systematic literature review of the development of the SRI sukuk from 2016 (the first available year in the field) to and 2021.

The study findings highlighted several pertinent SRI issues: the lack of standardization due to the different interpretations of Shariah and green, the lack of retail investors, which inevitably produce a lack of liquidity in the secondary market, thus limiting their growth, its funding allocation’ close resemblance to green financing, and the role of Malaysia and Indonesia as global sustainable financial hubs to stimulate the development of Shariah-compliant sustainable instruments and contribute to the international debate about the building of a global standardized framework related to sustainable investments.

The integration of the environmental principles of a green bond with the Shariah-compliant financial structure of a sukuk, the SRI sukuk, represents a vital crossroad in both sustainable and Islamic finance. Social-impact sukuk and green sukuk is an undervalued instrument that could play an important role in financing a more sustainable economic and financial system, including Islamic investing. This kind of instruments, which is based on a “pay for success” principle in the conventional layout, perfectly fit with the profit-and-lost sharing’s (PLS's) ethicality, the sustainability principles of Islamic finance and the religious principles of Islamic law.

The objectives of this paper are two-fold: first, to empirically compare and contrast the salient features of three financial instruments (FIs), namely sustainable and responsible investment (SRI) ṣukūk, social impact bonds (SIBs) and conventional bonds (CBs) and second, to examine the differences between the perceptions of the investors and the developers on the features of the three FIs.

Using a questionnaire survey, 251 completed and useable responses were received, representing a 42.54% response rate. In examining the differences and similarities in the characteristics of the three FIs, the inferential statistical of frequency and percentage were used. Wilcoxon and Mann–Whitney tests were conducted to investigate the differences in the salient features of the three FIs and the differences between the investors and developers' perceptions on the salient features of SRI ṣukūk, SIBs and CBs, respectively.

The results reveal that stakeholders view SRI ṣukūk, SIBs and CBs to be statistically significantly different from each other. This shows that stakeholders do not view SRI ṣukūk as “old wine in a new Sharīʿah-compliant bottle” but instead considered different from SIBs and CBs. Furthermore, stakeholders also differentiate between SIBs and CBs.

The paper provides empirical evidence that Islamic finance (IF) instrument, represented by SRI ṣukūk, is viewed as different instruments to conventional tools, represented by SIBs and CBs. First, it debunks the notion that IF is viewed as similar to its conventional counterpart. Second, SIBs are seen as different from CBs, illustrating the distinct categorisation of impact investing instruments. As such, third, the development of SRI ṣukūk and SIBs can provide diversification to portfolios as it is a unique instrument in the social finance and financial market.

The purpose of this study is to provide a critical review on how the Khazanah’s Sukuk Ihsan was structured in compliance with the requirements for issuance of Sustainable and Responsible Investment (SRI) sukuk set by the Securities Commission (SC) Malaysia.

To explain the structures and features of the Sukuk Ihsan, this study extracted important information from the sukuk’s Principle Terms and Conditions and Information Memorandum and presented them in a simple and easy-to-understand way. Next, this study refers to Part D: Requirement for Issuance, Offering or Invitation to Subscribe or Purchase Sustainable and Responsible Investment Sukuk of the SC’s Guidelines on Sukuk (revised edition: 28 August 2014) to assess the compliance of the sukuk in terms of eligibility of SRI sukuk issuer and SRI projects, use of proceeds, reporting and disclosure and independent assessment on SRI programmes. In addition, this study then compares the requirements stated in the SC’s SRI Sukuk Framework with the International Capital Market Association’s Green Bond Principles (GBP) and the USA’s Social Impact Bond (SIB) Act 2014.

The present study finds that the definition of eligible SRI sukuk issuer in the Guidelines on Sukuk seems to be more stringent compared to the one provided in the GBP and the US’ SIB Act. Nevertheless, the SRI Sukuk Framework provides a more comprehensive yet precise list of eligible SRI projects, covering both environmental and social aspects, compared to the GBP (which only focuses on broad categories of environmental projects) and also the USA’s SIB Act (explicitly outlines 13 social projects which are aligned with the US Federal Government’s agenda in tackling social illnesses). Indeed, the main difference between the eligible SRI sukuk projects and its conventional counterparts lies in its compliance to Shariah principles. It is also observed that a significant emphasis has been given on SRI legislations in ensuring proper reporting and disclosure provided to the SRI sukuk stakeholders together with critical evaluation on the impacts of SRI programmes provided by an independent assessor.

This paper contributes towards enriching the literature on the Islamic capital market, particularly on the integration between sukuk and social impacts investing. This paper was intended to highlight the important requirements in issuing SRI sukuk to various stakeholders of the Islamic capital market.

The authors hope to shed some lights on the unique features and structural applications of SRI sukuk and its importance in becoming an effective instrument to raise funds for social agenda of a country by providing a real and practical example.

The purpose of this paper is to examine the world’s first social impact bond (SIB) and the lessons that can be learned for the Islamic finance industry to fulfil its true objectives.

The Peterborough SIB was recently announced to be successful in achieving its targeted social and investment outcomes, reducing recidivism by 9 per cent and paying back investors a 3 per cent pa return. The paper compares Peterborough SIB with socially responsible investment (SRI) sukuk in terms of form and substance, and finds that there are various lessons from the Peterborough SIB that can be useful for future development of Islamic financial products.

Innovative social financial tools such as SIB exemplify the true spirit of risk sharing and social responsibility, which is arguably missing in current practices of the Islamic finance industry. With the growing interest towards SRI strategies and increase in socially motivated investors, such financial tools may not only help the sustainable growth of the Islamic finance industry, but also fill in the gap between its theory and practice.

As such, the paper also proposes a social impact sukuk model which integrates the key aspects learned from Peterborough SIB. This includes prioritising social impact, measurable success indicators, data and management systems, flexible contracts, third sector integration, risk sharing and fostering the culture of innovation.

The findings can offer some practical insights in dealing with the issue of Islamic finance practice being overly concerned with its formal adherence with Islamic legal rules whilst neglecting its true fundamental values.

This paper aims to discuss the urgent need to develop a sound and robust universal framework that would prove helpful in creating uniform acceptability of Islamic financial instruments. Among many problems, a particular problem in developing a uniform global framework for Islamic financial instruments is the existence of different madhahib within Islamic Fiqh. The leading and the most prominent Sunni madhahib that have survived till today are four, the Hanbali, Shafi, Maliki and Hanafi, while the most prominent Shia madhab is the Jafari madhab.

The research approach was descriptive and exploratory in nature. Secondary resources were used except for a semi-structured interview with a Shariah scholar with the justification that his knowledge and experience regarding the subject matter may prove helpful. The methodology included a systematic review of already issued Sukuk by various madhahib. Compared to a simple narrative review of a few case studies regarding Sukuk, this methodology has a benefit to provide the reader the power to assess the review and even replicate it. The results of this systematic review are summarized in the form of tables.

Ingredients were determined that would help make a truly global Sukuk security, a model acceptable to all madhahib of Islamic Fiqh. These ingredients include rentals, relationship between special purpose vehicle (SPV) and originator, transference to SPV, Sukuk structure, guarantee, liquidity, listing and tradability, convertibility, subordination and post-Ijarah price. Moreover, specific steps were also analyzed that must be taken to issue such type of Sukuk al-Ijarah.

This study is focused only on a type of Islamic financial instrument, i.e. Sukuk whose underlying was Ijarah-based contracts. This is due to lesser global acceptability for other Islamic financial instruments including other forms of Sukuk. Based on the nature of study, purposive/judgmental sampling was done. The sample population was 40 Sukuk (nine each from Hanafi, Shafi and Maliki madhahib, five each from Hanbali and Jafari madhahib and three from non-Muslim zones). Some Sukuk were dropped due to non-availability of enough data and to keep some semblance between the impact of the madhab on financial world and the data.

For practitioners and regulators, on the basis of the given recommendations, it would be possible to create a standardized product, acceptable for all madhahib of Islamic Fiqh. This standardization will lead to a unified platform that can attract a larger investor pool as well as better integration. For practical purposes, the proposed model of Sukuk al-Ijarah can be replicated for other Islamic financial instruments for global acceptability.

For an Islamic society, the expansion of Islamic economic system depends principally on unity. So integration is critical and also essential for the success of any Islamic financial instrument. When the society will move away from Riba and its associated evil, the society will move in a positive direction, while still making profits. The proposed model may also be utilized for socially responsible initiatives like protection of natural resources, advancement of renewable energy, economic development and rehabilitation to name a few.

Previous studies were silent on the development of comprehensive frameworks acceptable to all madhahib of Islamic Fiqh. This research study is the first study of its kind and is the first step toward integration, as it would try to suggest a global framework for Sukuk al-Ijarah that can be acceptable by the followers of any madhab of Islamic Fiqh.

This study aims to fill a gap in the literature by providing evidence for a “greenium” in the primary Sukuk market. The term “greenium” is defined in the study as the lower cost of capital or reduced yields that green Sukuk may offer compared to non-green Sukuk, reflecting investor willingness to accept lower returns for green investments. Therefore, the main aim of this study is to investigate the potential role of “greenium” as an incentive for issuers to fund eco-friendly projects, contributing to a sustainable environment.

This study uses propensity score matching techniques to provide an accurate comparison of pricing differences between green and non-green Sukuk issued in global primary markets during the period 2017–2022.

The results reveal that green Sukuk signify a “greenium” effect. This suggests that investors find green Sukuk attractive, willing to accept lower returns. Given the positive investor response to green initiatives in the market, issuers can capitalize on the growing demand for green Sukuk, leading to low-cost funding.

This study makes an important contribution to the literature at the interface of Islamic finance and environmental sustainability. In particular, it stands out by focusing on the pricing dynamics in the green Sukuk market and highlights the potential benefits of issuing green Sukuk to help achieve sustainability goals while providing access to lower cost of capital for the transition to a low-carbon economy.

Green sukuk (GS) is an emerging financial tool that has gained momentum in recent years owing to increased attention being given to Islamic finance, socially responsible investing (SRI) and sustainability agendas. Yet, GS studies are fragmented, dispersed and lack comprehensive reviews. As a response to this gap in academia, this paper aims to synthesize the knowledge on GS into thematic clusters, providing a more comprehensive understanding of the subject and offering guidelines for future research.

This study implemented a systematic literature review approach to analyse studies on GS that were published prior to and including June 2023. The PRISMA 2020 protocol was used in the sample selection process. A total of 62 peer-reviewed journal articles from six databases were identified and categorized into various themes.

The results suggest that previous research has predominantly focused on the areas of GS advantages, drivers, market development and potential sectors, along with challenges and recommendations to improve the market. However, it was found that some other aspects, including GS pricing, performance and purchasing intention, require further research attention. The analysis also indicated that the use of theories in the GS context was limited, with only five theories employed in just four out of the 62 articles examined. Moreover, this paper’s findings revealed that the studies employing quantitative and empirical analysis methods were limited to four articles. Geographically, most of the studies were conducted in Indonesia and Malaysia, while other countries with high-potential markets (e.g. GCC) had limited GS practices and studies.

The results of this study have several practical implications. For investors, a review of GS will provide greater insight into the understanding of the GS market, helping them make better investment decisions. For policymakers, this paper empowers them with the knowledge to make informed decisions regarding GS markets by highlighting key recommendations identified in the literature. Finally, the proposed guidelines can be used in future research.

While Green Bonds have received significant attention, there is a dearth of research on GS and those that exist are fragmented. A systematic literature review is necessary to identify knowledge gaps for future research.

The purpose of the paper is twofold. Firstly, this study aims to investigate the factors influencing stakeholders’ intention to invest in Shariah-compliant social impact bonds (SC SIBs) in Malaysia. Secondly, this study compares the differences in the perception of different stakeholders on the importance of the factors.

Using the extended theory of planned behaviour, the study undertakes a questionnaire survey on licensed capital market investors and individuals involved in the development of the financial market (developers). A total of 260 complete and valid responses were obtained from the survey. Multiple regression and Mann–Whitney tests were carried out to achieve the two objectives, respectively.

The results reveal that attitude (β = 0.447, p < 0.01), subjective norm (SN) (β = 0.255, p < 0.01) and moral norm (MN) (β = 0.163, p < 0.01) are significantly positive predictors of intention to invest in SC SIBs. In terms of the differences in the perceptions of the two parties, the results show that the factors have more effect towards developers than investors.

The empirical evidence from this study on the factors that influence stakeholders’ participation in SC SIBs is useful to the policymakers and interested parties in taking the next steps to develop, implement and promote SC SIBs to stakeholders in Malaysia. Fund managers can use the study’s insights to promote positive attitudes, SNs and MNs towards SC SIBs, especially targeting developers who are more influenced by these factors. More importantly, the results indicate a need for different strategies to influence the stakeholder investment behaviour of SC SIB in Malaysia to ensure that it is sustainable and viable in the long run.

This study aims to present a bibliometric analysis of Islamic social finance (ISF) by addressing gaps in the existing research, exploring the current trends of publications and determining possible future research directions in this field.

Relevant bibliometric data of published research during 1914–2022 was extracted from the Scopus database and 1,355 studies were considered for the analysis. Biblioshiny app from RStudio, VOSviewer and Microsoft Excel were the tools used for analysis.

The identified current research streams are management and distribution of ISF funds especially zakat through fintech; governance and accountability of ISF institutions; Islamic microfinance for poverty alleviation and financial inclusion; ISF for promoting sustainable development and achieving United Nations sustainable development goals; waqf endowments and cash waqf; and Islamic charities. The identified themes for future research directions are Islamic fintech, integration of ISF, sustainable development, economic recovery, social entrepreneurship, sustainable ISF ecosystem and supporting refugees.

It provides extensive and up-to-date literature on the current trends in ISF and future research themes which can be useful for researchers, professionals and policymakers in the field.

The findings of this research contribute to the solutions to socio-economic challenges and support sustainable development through ISF.

To the best of the authors’ knowledge, this research is one of the first attempt to provide a pervasive bibliometric review on ISF by including various aspects of ISF and extending the study period to more than 100 years.