Abstract

Ijarah Sukuk is becoming one of the most improved products in Islamic finance. It has become an alternative source of financing and liquidity for both private and public sectors. Also, it plays important role in development of the economy of Muslim and no-Muslim countries. The objective of this paper is to clarify the concept of Sukuk Ijarah and discuss its opportunity for economic development of the country. Also, the issues and challenges related to the implementation of Islamic finance particularly Sukuk by the Federal government of Nigeria (FGN) and also as an alternative to conventional bond. The paper adopts content analysis of relevant previous studies. Findings reveal the potential of Sukuk ijarah as an alternative for rapid economic growth and its functional role in attracting government and client to invest in it. Furthermore, the authors observe that misunderstanding among religious leaders is a major challenge to the growth of Islamic banks and implementation of Sukuk in Nigeria. It is recommended that workshops, seminars and conferences are to be organized by Islamic centres, financial institutions and academicians in Universities to spread knowledge and create awareness among Nigerians Muslims and non-Muslims about benefit and advantage of Islamic finance products and Sukuk in particular.

Highlights

  • Sukuk market has grown rapidly over the last few years in terms of numbers, size and sophistication

  • In January 2012, the CBN granted Jaiz bank an endorsement to operate as a regional interest free bank in Northern part of Nigeria with three branches situated in Abuja, Kano and Kaduna

  • In 2013 the first sukuk was issued by Osun state government of Nigeria and which is the first of its kind in sub-Sahara Africa (SSA)

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Summary

Introduction

Sukuk market has grown rapidly over the last few years in terms of numbers, size and sophistication. It is fast replacing conventional bonds and its being utilized in financing projects. It provides corporation and government with access to liquidity pool in addition to the traditional investor base (Ayu, Sary, & Nanggolan, 2020; Godlewski, Turk-ariss, & Weill, 2010). Sukuk market carries numerous benefits to the investors and issuers. Issuers can benefit from the massive increase in liquidity in the Islamic globe. An expanded number of multinational special purpose vehicle (SPV) are issuing sukuk to finance projects development. The improving trend of religiosity of Islam and the breakdown of the present capitalist financial system to benefit the society at large

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