Sukuk Financing Research Articles

Do Global Green Sukuk affect on Climate Change? Evidence in Issuing Countries

Uncertain climate change as a result of technological developments, often has a negative impact on the environment. This is shown by the number of carbon emissions that are continuously increasing. As a sovereign country, the issuing country of Green Sukuk Global strives to increase investment to support a sustainable development process. This study aims to analyze the effect of green finance, specifically on global green sukuk, on the adverse effects of climate change. Using time series data in four issuing countries (from January 2018 until December 2022) with an autoregressive distributed lag in the panel model approach. The findings show that in the long and short term, global green sukuk can reduce the adverse effects of climate change in the issuing country. However, economic growth affects increasing carbon emissions in the issuing country in the long term, while trade openness has no effect on climate change. To support sustainable economic development as evidenced by increased economic growth, it must be balanced with increased issuance of global green sukuk financing issues to reduce the adverse effects of climate change in issuing countries.

Unlocking Social Impact: How Sukuk Financing Empowers Waqf Institutions

Unlocking Social Impact: How Sukuk Financing Empowers Waqf Institutions

Cash Waqf Linked Sukuk Financing in the Development of Sustainable Agriculture from the Maqashid Syari'ah Perspective

The agricultural sector has a fairly large share in the country's development goals, but one of the main problems that always becomes an obstacle for farmers is capital support. The APBN that has been set by the government has not been able to be distributed evenly. Waqf is one of the Islamic social finances that has great potential, although until now its realization is still very minimal. This study tries to synergize waqf with integrated agricultural development in Brenjonk using a qualitative method with a case study approach. The results of this study offer a scheme that can help farmers to obtain financial assistance in agricultural development efforts through the Cash Waqf linked Sukuk instrument. CWLS yields can be allocated by BWI as Nazhir to Brenjonk organic farmers in the form of financing assistance for infrastructure development, skills training or procurement of tools that can facilitate the performance of farmers. Considering that waqf is a social fund, any assistance distributed to the target group is free of charge.

Development and evaluation of Islamic green financing: A systematic review of green sukuk

The threat of the global climate crisis demands improvement and adjustment from various sides, including the financial sector. Islamic finance responds to environmental responsibility by presenting environmentally friendly financing products in green sukuk. This study aims to show the development trend of the number of publications in green sukuk and systematize the results of studies that explain the development and evaluation of the emergence of green sukuk investments. This study analyzed 15 publications on green sukuk during the 2016-2022 years indexed by the Scopus database. As for methodology, the descriptive analysis was used to explain the green sukuk data quantitatively; the synthesis analysis was used to describe data based on four directions (the development of models (10 sources), opportunities (12 sources), challenges (12 sources), and evaluations of green sukuk (10 sources). Preferred Reporting Items for Systematic Review and Meta-Analyses standard were used to choose samples for this investigation. The green sukuk challenge is dealing with the sukuk market after the pandemic. Several evaluation findings regarding managing commitment from the government and investors for the renewable energy sector and efforts to provide low-cost sukuk financing and risk minimization are found. Green sukuk demands efficient management to be more viable, competitive, and attractive to investors if the operational area supports it. Green sukuk projects face expanding green funding, global climate financing, managing renewable energy, and validating greenhouse gas emissions. The green stock market reaction requires coordination amongst economic subsectors.

The impacts of Sukuk on financial inclusion in selected Sukuk markets: an empirical investigation based on generalized method of moments (GMM) analysis

PurposeThe current developments in the Islamic capital market raise questions about its one of the main objectives of developing the Islamic capital market is to achieve financial inclusion. Despite its policy significance, the empirical literature offers little evidence of the Sukuk-financial inclusion nexus. Thus, this study aims to contribute to the literature by empirically investigating the impacts of Sukuk financing on financial inclusion in most Sukuk-issued financial markets countries.Design/methodology/approachIn this study, the author used a two-step generalized method of moments (GMM) technique to explore the impact of Sukuk financing on financial inclusion in 18 countries using data from 1995 to 2017.FindingsThe study's empirical suggest that Sukuk increases financial inclusion and supports the view that Islamic capital markets' development alleviates financing obstacles and also reflects the critical role of the Islamic capital market as a vital contributor to increasing financial inclusion.Practical implicationsThe study recommends that Sukuk could be used as a tool to tackle the issue of financial exclusion.Social implicationsThe Sukuk market development creates new job markets through innovative projects. These jobs lead to increased income for the working class, leading to higher employment and stimulating investment and financial inclusion.Originality/valueThis is one of the first studies to investigate the Sukuk-financial inclusion nexus empirically. Additionally, the study has used advanced panel techniques in the context of Sukuk and financial inclusion linkage.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-06-2022-0424

The Potential of Sukuk for Financing Oil and Gas Sector in Nigeria

Nigeria has promising investment opportunities in the up and downstream sectors of the oil and gas industry that need financing. In the upstream, there are an estimated 37.2 Billion proven oil reserves and 182 Trillion cubic feet of natural gas. New investment opportunities are being developed, and individual and organizational investors need to finance their activities by purchasing drilling equipment and financing their infrastructures and storage facilities. Sukuk financing became a potential investment opportunity that could significantly address the upstream and downstream oil and gas sector and restore the glory of refineries in the country. There are currently three petroleum refineries in Nigeria with a stated capacity of 438 750. Perhaps the refineries are obsolete and bedeviled by poor management and turnaround maintenance due to the lack of funding. The study examines the potential of Sukuk financing oil and gas in the sector in Nigeria. The study employed Structural Equation Modeling to test the respondents' perspectives on the proposed model. Findings predict that the government may diversify and look for an alternative for funding that attracts more investors to participate in Sukuk financing. Future research is encouraged to use quantitative assessment methods to assess funding priorities between the Upstream, middle and downstream petroleum sectors.

Implementing Sukuk Financing in Indonesia: Policy Actions to Improve and Support Development Research and Development Infrastructure (RDI)

The Indonesian government realizes that developing alternative instruments for financing the state budget needs to continue—one of them with financing instruments based on sharia principles. This study examines the response of the Indonesian government in policy actions to seek financing for research and development infrastructure through Sukuk financing. This study uses a qualitative method with a narrative approach. This study uses three data collection techniques: regulatory survey, secondary data research, and Expert Elicitation with Experts' Judgments. Meanwhile, the data analysis technique uses content analysis, stakeholder analysis matrix, 're-analysis,' and digital discourse analysis. The results of this research reveal that the policy actions taken by the Indonesian government are through 1) regulatory in the form of policies related to the Sukuk financing policy in Indonesia, by issuing one regulation in the form of a law, one rule in the form of a Government Regulation of the Republic of Indonesia, and four rules at the level of ministerial regulations. On the other hand, the results of the mapping of stakeholders show that there are four clusters of actors, namely decision makers, project initiators, support partners, and civil society - media. 2) applicative action in the form of budget allocation related to infrastructure financing Sukuk in the research and development sector, during 2018-2022, financed 41 projects from 10 ministries/agencies. In the end, this research provides recommendations; namely, it is necessary to diversify the types of infrastructure that can be financed from Sukuk financing so that they follow the needs of Ministries/Agencies and Local Governments.

Economic Infrastructure Development in Bangladesh through Sukuk Financing

Economic Infrastructure Development in Bangladesh through Sukuk Financing

The Issuing of the Sukuk Framework in Afghanistan and Its Contribution to Economic Development

This article aims to provide an essential and significant proposal for the Sukuk issuance framework and explore its necessity in Afghanistan, to be Consistent with Shariah’s requirements and in light of the other Muslim country's experiences, especially Malaysia. The problem is, how can Afghanistan increase its economic development by issuing sukuk, and struggle against poverty and unemployment, and what are the advantages of sukuk on the financial dimension of Afghanistan? The article is divided into two axes. Accordingly, the first axis of this article focused on the general analysis of Sukuk and contains the Islamic worldview of Sukuk, the concept of Sukuk, the basic principles of Sukuk, requirements of Sukuk, benefits of sukuk, common types of Sukuk, securitization, and the most important distinctions between Sukuk and conventional bonds. The second axis gives information on how Sukuk can be issuance in Afghanistan and its regulatory framework, and legal and economic challenges, and provides suggestions for overcoming these obstacles as well. It investigates the remarkable impact of Sukuk on economic growth in Afghanistan in all aspects such as (GDP) Gross Domestic Product, (GCF), Gross Capital Formation, poverty eradicating, unemployment reduction, obtaining an independent financial system, prevention of budget shortfalls, contribution economic development. The data were collected from primary sources such as a questionnaire which has been conducted between the scholars and experts of Islamic financing, and secondary resources such as books, publications, websites, and official reports. Consequently, the findings showed that Sukuk financing will have an extraordinary impact on the Afghanistan economic system like its remarkable influences on economic growth for (SEAC) countries of south Asia, and (GCC) The Gulf Cooperation Council countries, therefore the searcher suggests securitization in Afghanistan as well for financing growth and economic development

Rural Electrification and Sustainable Planning of Sukuk Financing within the Isolated Communities in Nigeria: Using Investment and Blockchain Technology

The Renewable Energy system enhances rural communities' development in the country, specifically in North-East and North-West, Nigeria. The ability to overcome extreme poverty and improve their living conditions is related to the renewable energy technology available. The rural electrification planning approach consists of socioeconomic, environmental, and institutional sustainability dimensions. This study establishes specific objectives to achieve sustainability in rural electrification programs. Conceptual frameworks are proposed for achieving universal access anywhere with similar experiences. The methodology is proposed to 3000 isolated communities in North-East and North-West, Nigeria that lack electricity. Three different strategic approaches are formulated as a research-based investment analysis framework. Confirmatory Factor Analysis under Structural Equation Modelling is shown in Figure 2. While figure 3 addressed the technology aspect through blockchain technology. The findings of this work are intended to contribute to the improvement of rural electrification programs with Renewable Energy (RE) of the solar system.

Factors affecting sukuk market development: empirical evidence from sukuk issuing economies

PurposeBoth developed and developing countries, Muslim and non-Muslim, have been showing keen interest in sukuk financing. This interest was because of the lesson learned by both Asian and non-Asian economies that having a developed capital market is very essential to enable an economy resilient to the financial crisis. Therefore, this study aims to produce theoretical relationships and identify empirical support for the determinants of sukuk market development.Design/methodology/approachBy using panel data analysis, the study covers the period from 1993 until 2017, and includes 13 sukuk issuing economies as per the availability of data.FindingsThe findings of the study revealed that the stage of economic development, banking system, money supply and current account balance are positively associated with sukuk market. Interestingly, economic size and exports appear to be negatively associated with sukuk.Practical implicationsTo flourish the domestic sukuk market, authorities need to strengthen the existing financial system and economic development.Originality/valueThe study contributes in a limited body of knowledge on determinants of sukuk market development by exploring novel determining factors of foreign capital inflows as well as macroeconomic and financial factors.

SUKUK AND ISLAMIC BANKING FINANCING : HOW THE IMPACT FOR REAL SECTOR ?

Indonesia continues to strive to develop Islamic finance especially its Islamic banking and sukuk to support the real sector. The growth of Islamic finance in Indonesia is expected to encourage the development of the national economy. This study aims to investigate the impact of Islamic banking financing and sukuk financing on Indonesia’s industrial output. Applying the Autoregressive Distributed Lags (ARDL) framework to monthly data from January 2011 to December 2018, we find Islamic bank financing to contribute positively to the real sector in both the long and short term. In addition, we also document positive long run contribution of sukuk financing to industrial output . Indeed, over the long run, sukuk financing tends to have a greater real impact than Islamic banking financing. The results of the study implies that Islamic banking and sukuk play a vital role in supporting the real sector in Indonesia. Accordingly, recent initiatives by Indonesia to further develop its Islamic finance are steps in the right direction.

Determinants of Sukuk Issuers’ Financial Stability: Evidence from Malaysia

Financial stability and Sukuk expanded swiftly into the financial industry after the 2007-2008 global financial turmoil. Malaysia's Sukuk market is arguably the most prominent in Islamic finance globally, and its inherent nature gives it a better security on the premise of guaranteed firms’ financial stability and returns to investors. This study aims to explore the extent of the Malaysian firms’ financial stability are being influenced by the characteristics of Sukuk and also the firms’ characteristics. Sixty-one listed companies that have issued Sukuk from 1997 to 2017 have been selected for this study. The nave distance to default (DD) developed by Bharath and Shumway was used as a measure of the firms’ financial stability. Ordinary Least Squares (OLS) was employed in this study, and the results confirmed that Sukuk could promote the firms’ financial stability. The variables related to the characteristics of Sukuk that were found to influence financial stability were the intensity of Sukuk and the proportion of Sukuk financing. The firm size, valuation, solvency, and profitability were the firms’ characteristics that have also affected the firms’ financial stability significantly. All these provide evidences that Malaysia should play more active role in promoting the development of Sukuk market, and at the same time should be aware that financial stability is a systematic element which involved many complex factors.

Does Islamic Bonds (Sukuk) Market Development Discourage Islamic Debt Growth?

The aim of this study is to forecast the sukuk market development influences on Islamic debt in largest Islamic stock markets in GCC countries (KSA and UAE). This Study apply time series analysis technic to estimate long run auto regressive distributed lag model (ARDL). The data covers from Q2-2000 to Q4-2020 for 31 quarterly observations, therefore, the results show a negative significant impact of sukuk Income on Islamic Debt in both counties, while Sukuk Investment development has negative insignificant effect in KSA and negative significant impact in UAE. In addition, Sukuk Financing Payables development proxies indicate positive insignificant impact on rung run Islamic debt in both selected countries, this leads to the theory that Islamic Bonds (Sukuk) is entirely different from traditional bonds regarding their characteristics and economic role. Furthermore, the study provides empirical evidence for investors and policymakers that companies may issue Sukuk rather than traditional bonds when issuance of more outstanding debt and longer tenor is needed.

Cash Waqf Linked Sukuk (CWLS) Model: For Indonesia Sustainable Food Security

This study aims to build an integrated model between Islamic social finance, government sukuk financing and Indonesian food security. This study proposes an integrated model between Islamic social finance and government sukuk to build community food security through the cash waqf linked sukuk model. This model based on a modification of Sukuk issued by The Central Bank of Bahrain to provide a commodity in the future. The model proposed in this study is an innovative productive waqf model. The management involves both government and private companies. Sukuk are issued by the government through the ministry of finance or Bank Indonesia. Sukuk issued in social purposes with the underlying transaction is an innovative productive waqf. After the sukuk is issued, the funds are collected by means of a waqf contract, through cash waqf and assets. The funds or assets collected are submitted to the operational manager. The operational manager provides sukuk funds to farmers as capital for carrying out agricultural, plantation and livestock activities. Products that are prioritized are the primary needs of the community, including agricultural products of superior quality from biotechnology research, superior quality vegetables from biotechnology research in the field of plantations, livestock products from research field. The harvest is sold through the ministry of agriculture or through the traditional market to support the availability of food in sufficient quantities in a minimum price. The preferred products are the products of the primary needs of the community.

Does Sukuk financing boost economic growth? Empirical evidence from Southeast Asia

Purpose This paper aims to investigate empirically whether Sukuk financing is boosting the economic growth in Southeast Asia within the framework of the endogenous growth model. Design/methodology/approach This paper applied dynamic panel one-step system generalized method of moments as an optimal estimation approach to investigate the impact of Sukuk financing on economic growth in Southeast Asia spanning from 2013Q4–2019Q3. Sukuk financing was proxied by the total issued Sukuk holdings, while economic growth was proxied by gross domestic product. The sample covered all full-fledged Islamic financial institutions in the most developed Sukuk financial markets countries in Southeast Asia (Malaysia, Indonesia and Brunei). Findings The findings demonstrated that Sukuk financing is boosting economic growth in Southeast Asia, which reflects the significant role of the Islamic financial markets of Sukuk as a vital contributor to economic growth. Practical implications This paper would fill the literature by investigating the link between Sukuk financing and economic growth in Southeast Asia within the framework of the endogenous growth model, as the outcome of this paper serves as a guide for financial researchers, decision-makers and policymakers to improve the Sukuk market globally as an alternative financing source for the best contribution to economic growth. Originality/value This paper is the first that investigates empirically the link between Sukuk financing and economic growth in Southeast Asia with a new theoretical context of the endogenous growth model to gain robust information about this link.

Rehabilitation and Reconstruction of the North-East: The Role of Sukuk Financing

The Northeast region of Nigeria has been experiencing the devastating impact of Boko Haram insurgencysince 2009, which triggeredhumanitarian crisis and destruction of infrastructure,such as schools, hospitals, roads, bridges as well as homes and farmlands, leading to many becoming internally displaced persons and refugees. Both governmental and non-governmental organizations have been mostly providing relief services and materials, whilst only few Federal Government agencies and State Governmentsare providing reconstruction and rehabilitation due to insufficient sources of funds(Olaseni, 2012).The emergence of Sukuk to Nigerian Capital Market is a new development that provides alternative funding avenue for both State and Federal Governments to finance projects and infrastructure development for nation building (Alaro, 2020).It is against this backdrop that this study aims to reviewthe approaches of financing rehabilitation and reconstruction programmes in the Northeast and examines how the potentials ofSukuk financing could properly be utilized to complement the infrastructural deficit in the region. Thus, the research is an exploratory qualitative research that sourced cross sectional primary data collected through the use of structured questionnaire. Multistage purposive sampling method was employed in selecting the respondents for the study across the study area. Thematic Analysis was employed as the method of data analysis. Both descriptive and inferential statistics were used to summarize and interpret the results of the thematic analyses of the data obtained.Keywords: North-East, Reconstruction, Rehabilitation and Sukuk Financing

The Volume of Issuance of Government Islamic Securities SR-007 Series, 2015–2018

In Islamic finance, Sukuk instruments are similar to the bond market in conventional finance and are intended to increase long-term investment capital. However, according to Sharia, Sukuk means there is no uncertainty (Garar), interest (usury) and gambling (Maisir).This is also new in the financial market in Islamic Bank. The government uses Sukuk as an instrument for financing the state budget, and Sukuk financing has contributed to the development and financing of state projects. The amount of Sukuk issuance volume is influenced by external factors such as macroeconomic conditions and internal factors, namely prices and yields of Sukuk. The problem is whether inflation, exchange rates, Sukuk prices and returns affect the volume of Sukuk issuance. Therefore, this research aims to determine the effect of macroeconomic variables (inflation and exchange rates), Sukuk prices and Sukuk yields on the volume of Retail Sukuk issuance in Indonesia, using the Vector Error Correction Model (VECM) research model and the assistance of econometrics EViews 9. The data used in this study are time-series data from April 2015 to March 2018, with a research sample of Retail Sukuk with the latest maturity in March 2018, namely Retail Sukuk SR-007 series. The results of the study show that the inflation and price variables have a long-term significant influence on the volume of Retail Sukuk SR-007 issuance and only yield variables that do not influence both the long- and short-term, while the exchange rate variable has significant long- and short-term effects.

Not one but three decisions in sukuk issuance: Understanding the role of ownership and governance

This paper examines the determinants of three decisions modelled simultaneously: sukuk issuance, choice of a particular sukuk structure, and the volume of sukuk engagements. By using a sample of 736 non-financial listed Malaysian firms from 2008 to 2014, we test whether ownership structure and governance mechanism affect the different aspects of sukuk financing decision. In line with the monitoring hypothesis, we find that higher government ownership positively influences the decision to participate and to issue Murabaha sukuk with higher volumes. Aligned with the complementary hypothesis of corporate governance, we find that firms with a higher proportion of independent board member and superior audit-related governance are more likely to issue sukuk with higher volumes. Furthermore, board ethnicity influences the sukuk choice decision and prefers Musharakah sukuk.

Sukuk and Nation Building: An Overview of the Development and Impact of Sukuk Financing in Nigeria

AbstractAccording to Islamic Financial Service Board (IFSB), Sukuk are certificates that represent the holders’ proportionate ownership in an undivided part of underlying asset where the holder assumes all right and obligations to such asset. The emergence of Sukuk in Islamic capital markets is a significant development that provides alternative funding avenue for corporate entities, government and financial institutions. Despite the tremendous growth of Sukuk finance globally, the phenomenon is relatively new in Nigeria, though the regulator, Securities and Exchange Commission (SEC) has issued guidelines for the operation and placing of Sukuk in the country, apart from Osun State Government that has listed its Sukuk and the recent FGN Sukuk issuance, evidence shows that, none within the corporate and financial bodies had listed any Sukuk in Nigeria. It is against this backdrop that this paper aims at assessing the role of Sukuk financing in nation building with special reference to the recent Sukuk issuance by the Federal Government for the rehabilitation of Federal roads across the six geo-political zones of the Country. The researchers adopted analytical and descriptive approaches in this study. The main findings of the paper have shown that despite the novelty of Sukuk finance to Nigerian context, it has incalculable impact on nation building. It also revealed that Ṣukūk have many economic benefits and potentialities to Nigerian economy in terms of economic growth, financial inclusion, diversification, Liquidity Control and infrastructural financing, among others.