Advancing Sukuk Markets: Legal Frameworks, Regulatory Developments, and Default Challenges in Malaysia and the United Arab Emirates
DOI:
https://doi.org/10.21154/etihad.v5i1.10913Keywords:
Sukuk, Islamic Capital Market, Legal Framework, Regulatory ChallengesAbstract
Introduction: This study examines recent developments and key challenges in the sukuk markets of Malaysia and the United Arab Emirates (UAE), with a focus on legal, regulatory, and post-default frameworks. It analyzes the institutional structures that shape sukuk issuance in both countries. Research Methods: Using a qualitative approach, the research draws on academic literature, official reports, news articles, and other relevant sources. It also outlines fundamental sukuk theories, instruments, and global market issues. Results: The findings indicate that both countries have made notable progress in advancing socially responsible sukuk and regulatory initiatives. However, the UAE faces challenges such as the absence of standardized legal frameworks and independent rating agencies. Malaysia, while leading globally in sukuk issuance, continues to encounter difficulties aligning its regulations with international standards. Conclusion: The study recommends greater standardization, increased sukuk issuance, and more transparent post-default mechanisms to support the long-term development of sukuk markets.
References
Alshammari, T. (2017). Performance differences between Islamic and conventional bank forms. Banks and Bank Systems, 12(3).
Abrorov, S. (2020). The importance of sukuk in the development of economy: As an example of its impact on the income of the Malaysian population. Journal of Critical Reviews, 7(2), 776–780. https://doi.org/10.31838/jcr.07.02.142
Ab Majid, H., Shahimi, S., & Syah, H. (2011, September). Sukuk defaults and its implication: A case study of Malaysian capital market. 8th International Conference on Islamic Economics and Finance, Qatar. https://www.researchgate.net/publication/265085046
AAOIFI. (2008). Shari’a standards. Accounting and Auditing Organization for Islamic Financial Institutions.
Alsaeed, K. (2015). Challenges to mobilizing Islamic finance for long-term investments. International Monetary Fund.
Alswaidan, M. (2016). Saudi Arabian sukuk market: Recent trends and development. (Original work published 2013)
Angell, A. (2019, October 14). The legal and regulatory framework governing Islamic finance and markets in United Arab Emirates. United Arab Emirates.
Balkish, N., Azwan, M., & Zainal, R. A. (2012). The construct of sukuk, rating and default risk. Procedia - Social and Behavioral Sciences, 65, 662–667. https://doi.org/10.1016/j.sbspro.2012.11.181
Bank, C., Summit, S., Challenge, T., Islamic, G., Market, C., Developments, S., Islamic, T., Malaysian, T., East, M., & East, M. (2007, June). Zeti Akhtar Aziz: The challenge for a global Islamic capital market – Strategic developments in Malaysia.
Bowen, G. A. (2009). Document analysis as a qualitative research method. Qualitative Research Journal, 9(2), 27–40. https://doi.org/10.3316/QRJ0902027
Busari, S. A., & Zakariyah, H. (2019). Analysis of sukuk cross-default clause: A fiqh perspective. ISRA International Journal of Islamic Finance, 8(2), 50–57.
Creswell, J. W. (2014). Research design: Qualitative, quantitative, and mixed methods approaches (4th ed.). SAGE Publications.
Deloitte & ISRA. (2018). Sukuk in focus: The necessity for global common practices.
Duqi, A., & Al-Tamimi, H. (2019). Factors affecting investors’ decision regarding investment in Islamic sukuk. Qualitative Research in Financial Markets, 11(1), 60–72. https://doi.org/10.1108/QRFM-01-2018-0009
Ercanbrack, J. (2020). Islamic financial law and the law of the United Arab Emirates: Disjuncture and the necessity for reform. Arab Law Quarterly, 34(1), 1–20. https://doi.org/10.1163/15730255-12332011
Hanefah, M. M. (n.d.). Sukuk: Global issues and challenges. Journal of Islamic Accounting and Business Research, 16(1), 107–120.
Hosen, M., Tunku, U., & Rahman, A. (2018). The pitfalls of the Malaysian sukuk industry: Issues and challenges in practice. Journal of Islamic Finance and Management, 6(2), 34–45.
Iqbal, M., Ahmad, A., & Khan, T. (1998). Challenges facing Islamic finance. Islamic Development Bank.
Islamic Development Bank & Financial Insights. (n.d.). Sukuk in focus.
Kamba, W. J. (2010). Comparative law: A theoretical framework. The International and Comparative Law Quarterly, 23(3), 485–519. https://doi.org/10.1017/S0020589300065051
Khan, S. U., Khan, I. U., Khan, I., Din, S. U., & Khan, A. U. (2020). Evaluating ṣukūk investment intentions in Pakistan from a social cognitive perspective. ISRA International Journal of Islamic Finance, Advance online publication. https://doi.org/10.1108/ijif-12-2019-0194
Kusuma, K. A., & Silva, A. C. (2014). Sukuk markets: A proposed approach for development (Policy Research Working Paper Series). World Bank. https://doi.org/10.1596/1813-9450-6782
Market, G. S. (2020). Sukuk report (July ed.).
Miyazaki, M. (2010). A study on the feasibility of its introduction in Japan. Journal of Atomi University Faculty of Management, 9(0), 65–83.
Mrad, B. R. (2014, August). IFN country sector: New standards for sukuk institutions as well.
Muhamad, R., & Gunawa, A. Y. (2008). Malaysian sukuk: Issues in accounting. Malaysian Accounting Review, 16(1), 63–74.
Najeeb, S. F., & Vejzagic, M. (2013). Development, growth and challenges of Islamic capital markets: Comparative insights from the Malaysian, Indonesian, United Arab Emirates and Brunei markets. Journal of Emerging Economies and Islamic Research, 1(3), 100. https://doi.org/10.24191/jeeir.v1i3.9132
Nazar, J. K. (n.d.). Regulatory and financial implications of sukuk’s legal challenges for sustainable sukuk development in Islamic capital market. Unpublished manuscript, 1–16.
Venardos, A. M. (2010). Current issues in Islamic banking and finance. World Scientific. https://doi.org/10.1142/6979
Yean, T. W. (2009, November). Sukuk: Issues and the way forward. The Heritage House. http://eng.assaif.org/content/download/5319/31080/file/Sukuk%20Issues%20and%20the%20Way%20Forward.pdf
Zolfaghari, P. (2017). An introduction to Islamic securities (sukuk) (Working Paper No. 2). Uppsala University. http://www.jur.uu.se/digitalAssets/563/c_563862-l_3-k_wps2017-2.pdf
Zaidi, A. (2009). Nature of risks present in sukuk structures – Rating agency perspective in sukuk. In Islamic Capital Market Series 2009.
Conference, I. (2016, May). Proceedings of the 2nd International Conference (pp. 395–403).
Downloads
Published
Issue
Section
License
Copyright (c) 2025 Ziarmal Abdullah, Muchtim Humaidi
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
Etihad: Journal of Islamic Banking and Finance allow the author(s) to hold the copyright without restrictions and allow the author(s) to retain publishing rights without restrictions, also the owner of the commercial rights to the article is the author.
