Challenges and barriers to the development of sukuk in the European capital market

Dariusz Piotrowski ()
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Dariusz Piotrowski: Nicolaus Copernicus University in Toru?

No 4807695, Proceedings of Economics and Finance Conferences from International Institute of Social and Economic Sciences

Abstract: Sukuk are instruments of the capital market whose construction is based on the sharia rules. Over the last two decades, the sukuk market has become global. However, the main centres of trade are still located in South-Eastern Asia, with Malaysia at the forefront, and countries in the Persian Gulf region. Sukuk are present in the European financial market, mainly through companies' issues and the functioning of centres of trade in London, Luxembourg and Dublin. Despite that, the Islamic certificates have not yet gained significant interest. The paper will indicate the types of challenges and barriers related to issuing and trading sukuk in the European market. The research applies an analysis of literature on the subject, reasoning based on statistical data regarding the European market and a case study of a 2014 sukuk offering transacted by the government of the United Kingdom. The paper indicates that the specific characteristics of sukuk lead to the conclusion that they should be treated as a separate category of capital market instruments. In consequence, trading in these instruments on the European financial market requires an adjustment of the applicable legal norms. What is more, the fact that sukuk's structure is more complicated than that of traditional financial instruments increases risks and costs of the issuers. The distinctness and variety of sukuk forms hinder financial risk assessment, and thus have a negative impact on the scale of investors' interest in sukuk.

Keywords: Sukuk; Islamic finance; European financial market; development barriers (search for similar items in EconPapers)
JEL-codes: G18 O16 Z12 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2017-07
New Economics Papers: this item is included in nep-sea
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Published in Proceedings of the Proceedings of the 8th Economics & Finance Conference, London, Jul 2017, pages 69-83

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