Islamic Financial Assets Research Articles

THE IMPACT OF THE HALAL INDUSTRY AND ISLAMIC FINANCIAL ASSETS ON INDONESIA'S ECONOMIC GROWTH USING THE VECTOR AUTOREGRESSION (VAR) APPROACH

The present study intends to examine the influence of the halal business and Sharia financial assets on economic growth in Indonesia. The research method requires a quantitative methodology. Research data was acquired in time series form from the Central Statistics Agency (BPS), Financial Services Authority (OJK), and State of the Global Islamic Economy Report (SGIE). The VAR approach is used for analysis once the data is interpolated monthly. The findings in this research suggest a favorable and significant association between the halal industry and economic growth in Indonesia in the short term. Meanwhile, Islamic financial assets significantly affect economic growth in Indonesia. According to the results of the Granger causality test, a one-way causal relationship exists between economic development in Indonesia and the halal industry. The research results demonstrate that the halal industry is essential in supporting economic growth in Indonesia. With this research, the halal industry and Sharia financial assets can improve Indonesia's economic growth by increasing the halal sector.

STATE AND PROSPECTS FOR THE DEVELOPMENT OF ISLAMIC FINANCE INSTRUMENTS (SUKUK) IN RUSSIA AND ABROAD

The search for new sources of financing investment projects in modern Russia in the context of external sanctions and the implementation of geopolitical threats actualizes the problem of incorporating Islamic finance instruments into the structure of the financial market. The early twentieth century development experience of a number of foreign countries shows the steady growth of the assets of Islamic banks, investment funds and the volume of issuance of investment certificates (sukuk), which constitute the main segments of Islamic finance in the world. Islamic financial assets are widely represented in the Gulf countries, Southeast Asia, the Middle East and South Asia, and Africa. The implementation of the principles of Islamic finance in the Russian Federation is hampered by legal, cultural, historical and political factors. While there are certain Islamic financial products in Russia, there is no issue of sukuk at all. In this regard, the purpose of this paper is to study the principles of Islamic finance and the functioning mechanism of the market for the investment certificates (sukuk), possibilities and limitations of their implementation in the modern Russian economy. The author defines sukuk as an Islamic financial instrument used for securitization of assets, and identifies its differences from traditional bonds. Alternative approaches to solving the problem of compliance of sukuk with Sharia principles are analyzed. The prerequisites for realizing the potential of sukuk in modern Russia are determined and the obstacles to their issuance are formulated. It is concluded that the adoption of the Federal Law of 04.08.2023 N 417-FZ "On Conducting an Experiment to Establish Special Regulation in Order to Create the Necessary Conditions for Carrying out Partnership Financing Activities in Certain Constituent Entities of the Russian Federation and on Introducing Amendments to Certain Legislative Acts of the Russian Federation" and its implementation, taking into account its provisions of pilot projects in a number of Russian regions, will make it possible to intensify the process of incorporation of project financing instruments into the structure of the financial markets of modern Russia.

Bibliometric Analysis on Islamic and Conventional Money Demand

The Islamic finance industry in the world has been snowballing in the last ten years. In its implementation, the Islamic financial system does not use an interest rate system but uses a profit-sharing system. The increase in global Islamic financial assets is in line with the theory that states that the profit-sharing system is better than the interest system because the Islamic money demand model, which uses the profit-sharing system, tends to be more resistant to shocks compared to the conventional money demand model which uses the interest system. This research aims to prove the validity of this theory. By using the method of bibliometric, the author found 391 studies that discussed "Islamic and Conventional Money Demand". The results show that there are 5 cluster which have become research paths, namely the Economic Policy Framework and Financial Analysis, Real Sector Activities, Economic Research Matrix, Financial Governance in Dual Banking Systems, and Money Markets.

AI-DRIVEN CAPITAL ASSET PRICING MODEL FOR ENHANCING SHARIAH-COMPLIANT INVESTMENT DECISIONS – A CHINESE STOCK MARKET ANALYSIS

The CAPM makes it possible to estimate prices for specific instruments, like stocks, to project investment returns. As a key element of corporate finance and investment banking, the CAPM investigates the relationship between the level of risk associated with the investment and the inherent risks of the market as a whole. Several assumptions must be used to create the AI-driven mathematical model for Islamic financial assets to achieve the model. The first is that the expected values and standard deviations of the asset's returns are the only factors that influence investors' choices. Additionally, since the zakat and purification are deducted from the anticipated returns, there are no transaction fees. The assets may be marketable and are infinitely divisible in addition. Finally, there is no cap on the amount that may be lent or borrowed at the Sukuk profit rate or other Islamic benchmark rates because all expectations are homogenous. We presented a new AI-driven Islamic CAPM for the estimation of returns for Shariah-compliant A-Shares enterprises. The methodology represents a new AI-driven estimation framework integrated into the Islamic CAPM methodology for the estimation of returns and selection. The methodology was evaluated on an Islamic A-share portfolio, with the stocks being listed on both the Shenzhen and Shanghai stock exchanges. The analysis demonstrates the ability of the methodology to provide Shariah-compliant optimal returns for the stocks and ensure Shariah compliance of the portfolio allocations.

Financial intermediation through risk sharing vs non-risk sharing contracts, role of credit risk, and sustainable production: evidence from leading countries in Islamic finance.

The asset side of Islamic banks has two different portfolios running side by side, namely risk-sharing (PLS) and non-risk sharing (non-PLS) financing. The segregation of PLS and non-PLS financing has gathered some attention recently owning to its relative importance for sustainable economic output. This study attempts to analyze the impact of decomposed Islamic financing modes (PLS and non-PLS) with a particular focus on their impact on real economic activity. In addition, we moderated the relationship with asset quality of aggregate Islamic banking sector. Quarterly data from 2014 to 2021 have been sourced from datasets of the Islamic financial service board (IFSB), the International Monetary Fund (IMF), World Bank, and Central banks' data streams. Eleven countries have been selected based on the highest local and globalshare in global Islamic financial assets. Panel data regression model has been used in this study. The findings indicate that PLS financing is a weaker driver to channelize funds. However, industrial production output is significantly affected by non-PLS financing. Further the results suggest, Islamic finance-output nexus found to have a stronger relationship in the presence of higher asset quality of Islamic banks. The results show that firms mostly rely on non-PLS financing, due to reduced asymmetry and higher transparency in non-PLS contracts compared to PLS modes. The results have implications for governing bodies of Islamic financial system in boosting risk-sharing contracts and firms to limit agency conflicts arising from fluctuating cost of financing.

Ekonomi Syariah: Menjawab Strategi Pemulihan Ekonomi Pasca Pandemi

<p>The Covid-19 pandemic had a considerable influence, particularly in economic spheres. The occurrence of problems such as layoffs, unemployment, rising poverty rates, and economic growth is seldom enough to necessitate a remedy. The goal of this research is to see how Islamic economics might help with post-pandemic economic recovery. This research employs a qualitative descriptive approach, as well as content analysis and a literature review (library research). Secondary data was obtained from the institution's official website. The study's findings show that Islamic economics, when combined with the framework of the national economy, makes a positive contribution to dealing with and improving post-pandemic economic conditions, including: (a) special instruments that can protect vulnerable groups of people, such as philanthropic models of zakat management, infaq, waqf, shodaqoh, and tafakul; (b) philanthropic models of zakat management, infaq, (b) Islamic financial development features and tools that assist and recover the UMKM sector through risk-sharing economic growth and prosperity, as well as simpler processes that increase social welfare. c) Capital development and distribution as a means of reviving the green economy (green economy). The growth of Islamic financial assets, such as Islamic banking, Islamic IKNB, and Islamic capital markets, has made a significant contribution to the national economy's structure.</p>

The resilience of Islamic equity funds during COVID-19: Evidence from risk adjusted performance, investment styles and volatility timing

This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock since they outperformed non-Islamic peers during the peak months of the pandemic. The trend continues even when the spread smoothens. These findings confirm the safe-haven properties of Islamic equity funds, which is helpful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to each stage's uncertainties. The results suggest policymakers should further investigate Islamic financial assets and their underlying principles to improve the resilience of economic systems in any future black swan events.

THE INTERPLAY BETWEEN THE GLOBAL ISLAMIC FINANCE AND ECONOMIC GROWTH OF MUSLIM COUNTRIES

Abstract. The article discloses development peculiarities of the global Islamic financial industry and determines its interplay with the economic growth of Muslim countries. The aim of the article is to reveal current trends in key segments of the global Islamic finance market (Islamic banking, capital market and Iinsurance) and analyze the impact of each of them on the economic growth of the countries, which are most developed in the field of Islamic finance. The countries surveyed were selected according to the Islamic Finance Development Indicator (IFDI), which reflects the general state of the Islamic financial industry worldwide and in each country. IFDI is based on five indicators: quantitative development (QD), knowledge, governance, corporate social responsibility (CSR) and awareness. In 2019, the United Arab Emirates (UAE), Bahrain, Indonesia, Malaysia and Saudi Arabia were the most developed countries in terms of Islamic finance. Examining the impact of different types of Islamic financial assets on the GDP of these Muslim countries, we used Eviews10 to conduct a regression analysis, which showed a positive relationship between GDP and only two types of assets, namely bank and Islamic bonds (sukuk). associated with significant volumes of these segments of the global Islamic financial market and the tradition of investing in key sectors of the economy. We discovered the negative relationship between GDP and Islamic insurance (Takaful) in all countries studied, which can be explained by ineffective investment strategies of Islamic insurance companies, which suffer from low profitability and are unable to increase their assets in line with current trends in innovation and development. We also found the inverse relationship between Islamic funds and GDPs of the UAE, Malaysia and Saudi Arabia, which may be related to the distribution of financial resources from these countries to other parts of the world and investment cycles, including the waiting period before repatriation of profits and interest; the concentration of funds in major markets makes it impossible to scale their activities in the global market. Keywords: Global islamic finance, Islamic banking, Islamic capital market, Sukuk, Islamic funds, Takaful, Economic growth. JEL Classification G15, O43, O53, Z12 Formulas: 1; fig.: 1; tabl.: 5; bibl.: 20.

Islamic Financial Depth, Financial Intermediation, and Sustainable Economic Growth: ARDL Approach

The pre-eminence of Islamic finance from the perspective of economic growth has been a long-standing debate. In recent decades, there has been a paradigm shift from interest-based banking to Islamic financial system. This study intends to examine the dynamic interaction of Islamic financial depth (IFD), Islamic financial intermediation (IFI), and asset quality with economic growth in a dual banking system. The paper employs autoregressive distributive lag regression (ARDL), error correction model (ECM) and Granger causality to examine the long and short run linkage by using the quarterly data of Pakistan from 2005 to 2019. The authors run two models to analyze the relative importance of financial depths (Islamic and conventional), financial intermediation (Islamic and conventional), and asset quality of both financial systems. A long-run relationship flowing from finance to growth in both Islamic and conventional finance models has been observed in our study. Furthermore, the findings recommend that strong financial intermediation plays an imperative role in driving economic growth by both financial sectors. The presence of a higher degree of Islamic financial assets in the economy contributes towards economic growth in the short-run. The results show that asset quality possibly plays an important intervening role in the overall finance-growth nexus.

Critical assessment of Islamic financial assets pricing in South-East Asia: evidence from NARDL modelling

PurposeThis study aims to critically examine the pricing of Islamic financial assets (Sharīʿah-compliant assets, Sharīʿah-compliant securities, Sharīʿah-compliant financing and Sukuk) in the three South-East Asia countries such as Malaysia, Indonesia and Brunei to provide necessary information to the policymakers and Islamic finance investors for making a sound decision.Design/methodology/approachThis study used secondary data and used the nonlinear autoregressive distributed lags (NARDL) model to estimate the reaction of Islamic financial assets in South-East Asia towards price changes. Wald-test was used to diagnose the final model.FindingsThe result of this study shows that the majority of Islamic financial assets in the three South-East Asia countries exhibit positive and negative long-run effects. The findings reveal a long-run asymmetric relationship that supports rockets and feathers effects. The indication is that Islamic financial assets pricing deviates from weak form EMH. Pricing of Islamic financial assets reveals unfair pricing.Practical implicationsPrice adjustment of Islamic financial assets requires urgent attention of policymakers to prevent Sharīʿah non-compliant risk. Therefore, the Shariah advisory board in those countries, Accounting and Auditing Organization for Islamic Financial Institutions and Islamic Financial Services Board are hereby advised to act on the factors that might enable rockets and feathers effects on the pricing of Islamic financial assets, as the long-run asymmetric relationship is established.Originality/valueThis study is novel as it critically and simultaneously examines the pricing behaviour of Islamic financial assets in the three South-East Asian countries. The findings from the study provide vital information on the pricing behaviour of Islamic financial assets to the policymakers and investors.

The Resilience of Islamic Equity Funds during COVID-19: Evidence from Risk Adjusted Performance, Investment Styles and Volatility Timing

This paper analyses the risk-adjusted performance of Islamic and conventional equity funds during three stages of the COVID-19 pandemic. We show that Islamic equity funds demonstrated differentials in risk-adjusted performance, investment styles, and volatility timing compared to their conventional counterparts. Specifically, the results revealed that Islamic equity funds are more resilient to COVID-19 shock, since they outperformed non-Islamic counterparts during the peak months of the pandemic. These findings confirm the safe haven properties of Islamic equity funds, which is useful for investors aiming to hedge pandemic risks. The style analysis reveals investment drift from riskier styles to more prudent options in response to the uncertainties underlying each stage. The results suggest policy makers should further investigate Islamic financial assets and their underlying principles to improve the resilience of financial systems in any future black swan events.

Explore the Lessee Accounting Treatment When Utilizing the Islamic Financial Leasing

Abstract This study aims to discuss the effects of the AAIOFI accounting standards of financial leased assets on the accounting treatment of the lessee in the case of using the Islamic finance lease. The importance of this study became evident when AAIOFI announced Islamic accounting standards with a significant difference between the IFRSs about the recognition of leased financial assets. Islamic financial institutions recognize the financial leased assets following AAIOFI accounting under long-term assets in the statement of financial position. This study used the interviews as a qualitative research method with financial managers of Jordanian companies using Islamic financial leasing. This study reached the conclusion that both Islamic financial leasing parties recognize the assets in the long-term asset side. The recommendations to avoid the inflation of the Islamic financial leased assets will be by applying a reasonable accountancy treatment by the lessee and consider it as operational leasing with proper justification for the non-compliance with the IFRS.

SECTORAL ANALYSIS ON THE IMPACT OF ISLAMIC BANKS TO THE MALAYSIAN ECONOMY

Malaysia is a well-known Islamic finance hub with a growth trend in its Islamic financial assets. The growth of the Malaysian economy since independence has also been commendable, with a rising contribution from Islamic banking and finance. This study offers a different perspective by undertaking a sectoral analysis on the impact of Islamic banks in Malaysia. It aims to fill the gap in the literature by investigating how Islamic bank financing (IBF) affects economic growth in Malaysia, both overall and at the sectoral level. Three sectors are observed in this study: agriculture, industry and services. Both long-run and short-run analyses are undertaken for the data period 2007Q1 to 2018Q4. The Autoregressive Distributed Lag (ARDL) method is utilised where IBF is found to significantly and positively affect the economic growth of Malaysia, at the overall and sectoral level. Nonetheless, there is a negative relationship in the agriculture sector and no cointegration in the industry sector. The results of this study are expected to provide insights for policymakers in encouraging more optimalIslamic financing to economic sectors in Malaysia.

Mathematical modelling of a shariah-compliant capital asset pricing model

PurposeThe capital asset pricing model (CAPM) is the most widely used asset pricing model that measures risk–return relationship. The CAPM is based on Markowitz’s mean variance analysis. The advancement of Islamic finance leads to the question whether or not the practice of modern investment theories and analyses such as the Markowitz’s mean variance analysis and CAPM are in accordance to shariah and could be used in pricing Islamic financial assets. Therefore, this paper aims to present a review of the CAPM and to discourse the set of assumptions underlying the model in terms of shariah compliance.Design/methodology/approachAlthough most of the assumptions are not contradictory to shariah principles, there are Islamic variables such as prohibition of short selling, purification and zakat that should be taken into consideration when pricing Islamic financial assets. We then develop a mathematical model which is a modification of the traditional CAPM that incorporates principles of Islamic finance and integrating zakat, purification of return and exclusion of short sales.FindingsAs a proof-of-concept, this paper presents the results of an empirical study on the proposed shariah-compliant CAPM in comparison to the traditional CAPM. The results show that the proposed Islamic CAPM is appropriate and applicable in examining the relationship between risk and return in the Islamic stock market.Originality/valueThis study contributes to existing body of knowledge by presenting an algorithm and mathematical derivation of the shariah-compliant CAPM which has been lacking in the literature of Islamic finance. The paper offers a novel approach in pricing Islamic financial assets in accordance to shariah, advocated by modern investment theories of Markowitz’s mean variance analysis and CAPM.

GLOBAL ISLAMIC FINANCE ASSETS: ANALYSIS OF THE ISLAMIC BANKING IN ALGERIA

No doubt that Islamic banks have proved its efficiency and effectiveness in both :In methods of financial management and also in the mobilization of financial resources for the sake to promote development in various economic sectors not only in Islamic countries but even in European as well and of course according to Islamic Sharia rules. The aim of this paper is to examine the performances and the Islamic methods adopted to improve the allocation of financial resources and its specific ways to boost earnings. Besides, Islamic financial assets were involved in huge financial markets due to its high quality of financial services provided to investors. Actually, Islamic banking exists in more than 67 countries and by the end of 2019 they may reach about 75 countries in the world. The results show that legislation, shortage of qualified individuals and the lack of using a high technology are the most critical factor of Islamic banking in Algeria.

Herding behaviour and Islamic market efficiency assessment: case of Dow Jones and Sukuk market

PurposeThe purpose of this paper is to present the Islamic stock and Sukuk market efficiency and focus on the presence of investor herding behaviour (HB) captured by Hurst exponent estimation.Design/methodology/approachThe Hurst exponent was estimated with various methods. The authors studied the evolving efficiency of the “Dow Jones” indices from 1 January 2010 to 30 December 2016 using a rolling sample of the Hurst exponent. In addition, they used a time-varying parameter method based on the Hurst of delayed returns. After that, the robust Hurst method was considered. In the next step, the efficiency of the different activity types of Islamic bonds was studied using an efficiency index. Finally, the Hurst exponent estimates were applied to assess the presence of HB.FindingsThe results show that, firstly, there’s a strong correlation between the “DJIM” and “DJSI” prices and returns. Secondly, by using robust Hurst estimate, it is observed that the “DJIM” is the most efficient market. The Hurst exponent estimation results show that HB is more intensive in the Islamic stock market. These results indicate also the inexistence of this behaviour in the studied Sukuk market.Research limitations/implicationsSukuk as Islamic financial assets is recent. Their relative time series are not long enough to apply the long memory approach. Furthermore, this work can be extended to study other Islamic financial markets.Practical implicationsHerding affects risk-return characteristics of assets and has an impact on asset pricing models. Practitioners are interested in understanding herding and its timing as it might create profitable trading opportunities.Social implicationsThis work analyses the impact of Islamic principles on the financial markets and their ability to understand some behavioural biases.Originality/valueThis study contributes to the literature by identifying the efficiency and the presence of HB with Hurst exponent estimation in Islamic markets.

An Investigation Of Islamic Finance And Islamic Banking In Malaysia

İslami finans alanında dünyada lider ülkelerden olan Malezya’da İslami bankaların varlıkları yanı sıra sukuk ve diğer İslami fonlar İslami finansal sistemde önemli bir pay almaktadır. Ülkede, İslami finansal sistemin gelişimini sürekli kılmak adına Şeriat kuralları dikkate alınarak yeni İslami finansal enstrümanların geliştirilmesi konusunda önemli inovasyon çalışmaları yapılmaktadır. Ülkede İslami bankacılık uygulamalarının başlatıldığı 1983 yılından günümüze sektörde önemli ilerlemeler kaydedilmiştir. Günümüzde 65 milyar $’ı aşan sermayesi ile İslami bankacılık sektöründe Malezya, model bir ülke konumundadır. İslami bankacılık sisteminin ortaya çıkışında mudilerden gelen faizsiz hizmet alma talebi önemli bir motivasyon olmuştur. Bankacılıkta dual/ikili sistemin uygulandığı ülkede, yerli ve yabancı İslami bankaların yanı sıra konvansiyonel bankalar da faaliyette bulunmaktadır. Malezya’da Şeriat kurallarınca uygun görülen Mudaraba, Muşaraka, Murabaha, Selem, Vadîa gibi çok çeşitli İslami kontrat modelleri uygulanmaktadır. Öte yandan, 2002 yılında Şeriat hükümlerine uygun olarak Sukuk ihracına başlanmıştır. Malezya günümüzde sukuk ihracı konusunda dünyanın önde gelen ülkeleri arasında yer almaktadır. Ancak Malezya’da, İslami finans konusunda diğer ülkelere göre rekabetçi üstünlüğe karşın, uygulamada bazı güçlükler yaşanmaktadır. Bu çalışmanın amacı, Malezya’da İslami bankacılık ve İslami finans uygulamalarını incelemektir. Malezya’da İslami bankacılık ve İslami finans uygulamaları hakkında ayrıntılı bilgiler verildikten sonra bu ülkede İslami finansın geliştirilmesine yönelik öne çıkan politika önerileri üzerinde durulacaktır. Çalışma, Malezya’da finansal sistemin yapısı yanında İslami bankacılığın yapısı ve işleyişi, İslami finansal enstrümanlar, sukuk ve tekâfül uygulamaları ile İslami finans sistemin gelişmesine yönelik politika önerileri başlıklarından oluşmaktadır.

Islamic religiosity and Islamic financial asset holdings (IFAH)

Purpose This paper aims to examine the relationship between Islamic religiosity and Islamic financial asset holdings (IFAH) among Muslim individuals in Malaysia. Design/methodology/approach Data for this study were collected through a survey questionnaire, and a sample of 751 working Muslims in Kuala Lumpur was obtained. Islamic religiosity was measured via religiosity levels and religiosity dimensions. IFAH was measured as the fraction of Islamic financial assets held in a financial portfolio. A generalized linear model (GLM) was used to estimate the relationships. Findings The results show that religiosity level influences the IFAH. Devout Muslims held more Islamic financial assets than casual Muslims. All religiosity dimensions influenced IFAH, with faith having the greatest influence and virtues the least. Educational level strongly influenced IFAH. Research limitations/implications The sample consisted of working Muslims in Kuala Lumpur; hence, generalization cannot be made to all Malaysian Muslims. This study only focused on Islamic financial assets and did not consider other types of Islamic financial products, such as financing. Practical implications Efforts to encourage Muslims to opt for Islamic financial assets may be more effective if they begin from the core of religious education. Educating individuals on Islamic principles, including the values and concepts of Islamic finance, is important to encourage the Islamic banking industry to prosper among Muslims. Originality/value The paper provides an extension of current literature on spirituality and religion by incorporating a comprehensive measure of Islamic religiosity and its relationship with financial asset holdings.

Beyond finance: Impact of Islamic finance on economic growth in Pakistan

Islamic finance, which may have been considered only in the context of a multitude of trading structures among economists, merits a fresh evaluation in how it dovetails with and supports national economic growth. This study examines the dynamic interaction between Islamic financing and economic growth of Pakistan by employing the unit root test, cointegration test and Granger Causality tests to see whether the Islamic financial system influences the economic growth. For the analysis, time series data of total Islamic financing and real GDP per capita, Islamic financial assets, and population to represent real economic sector were considered. Findings/Originality : This paper finds that a well-functioning Islamic financial system promotes economic growth. It also finds an evidence of a bidirectional relationship between Islamic asset financing and population. It implies that population reinforces Islamic finance, and population attracts Islamic financing.

The Role of Political Risk and Financial Development Factors on Sukuk Market Development of Gulf Cooperation Council (GCC) Countries

The literature related to the financial management acknowledges the significant role that political risk play to determine the financial market development. Further, financial system development (banking and financial markets) competes to provide long-term financing, and this competition might be positive or negative for each other. The aim of this paper is to propose a conceptual model/framework for investigating the role of political risk and financial market on Sukuk market development in Gulf Cooperation Council (GCC). GCC economies depend heavily on oil revenues which makes them subject to oil prices fluctuations. Therefore, GCC’s governments should diversify their economies by looking for Sukuk as an alternative source of financing, to cover their budget deficit, when the price of oil decreases, and reduce their reliance on oil, because Sukuk has advantages compared to the conventional bond particularly in terms of less information asymmetry. The prior studies have mostly focused on firms' characteristics determinants of Sukuk issuances but gave a little consideration to the role of country' characteristics on Sukuk market development. This paper proposes a framework to explain the political risk and financial markets determinants of Sukuk market development with a focus on the GCC countries that have the largest region in terms of the Islamic financial assets. It is anticipated that the outcome will support policymakers to improve the current state of Sukuk market.