Zawaya/Hawkamah Report on Sukuk

 

Zawaya and Hawkamah have teamed up to produce a 130 page report on the Sukuk market.  You can get your copy by registering here.

The report contains articles on a variety of topics as well as numerical analysis of the state of and trends in the Sukuk market by Ernst and Young.

One very interesting section is on the core weaknesses in the Sukuk market.  I think that is where the prudent investor should begin as understanding risk is the key to a good investment decision.  

One article in that section that caught my eye was a discussion by two attorneys from Vinson and Elkins on some of the legal issues associated with sukuk structures and default:

1. "In conventional finance and investment markets, the post-default path is well worn. For this reason, much of the process of structuring and documenting transactions, particularly in common law jurisdictions, accounts for the possibility of a worst case scenario. Precedents indicating what such a scenario may entail are readily available in the context of conventional transactions. The same cannot be said for Islamic transactions."
2. "Another factor contributing to the uncertainty surrounding post-default Sukuk is that many are subject to partially or wholly non-Shariah based legal regimes."

I had written earlier on this topic (here and here and here).  It seems we share some of the same legal concerns.