Islamic Capital Market : Sukuk and Its Risk Management in the Current Scenario
Abstract: Islamic finance is acquiring a growing respected place in the world financial system and its market share has been growing by more than 15 percent annually for the last ten years. Sukuk is the financial instrument which is considered to be the icon of the Islamic finance now. It is now one of the fastest growing financial instruments in the world. In this thesis, Sukuk and its original structures are defined and discussed. The features of each structure and their practicality are also highlighted. The main and most important contribution of this thesis is adiscussion and an analysis of the risk identification of Sukuk structure. The management of risk associated with Sukuk structure is also a matter of great importance. A qualitative research approach adopted with unstructured interviews with different experts both in the Islamic and traditional finance field from three different countries. Respondents observe that Islamic capital market is growing and it has established its identity in the world financial market. This bright picture of Sukuk success brings some major risks which are identified as, regulatory risk, Shariah compliance risk, liquidity risk, market risk, credit risk, risk related to underlying asset, third party risk. It is found that risk management practices are very weak at the moment and these risks are not currently well managed.These risks are more and complex and there are no well standardized and documented techniques which can be used to hedge these risks. Sukuk are exposed to these risks .Notmuch importance has been given to the risk management yet and the main focus remainson the issuance of Sukuk .It observe that without proper risk management of the Sukuk structure its success story will always remain under question.
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