volume of USD 9.7 trillion by 2029 (refer chart). Islamic finance is divided into various segments: the largest sector is Islamic banking, which, according to LSEG, had a volume of USD 4.32 trillion in 2024. This is followed by Sukuk (USD 1.03 trillion), Islamic funds (USD 308 billion) and takaful (Islamic insurance: USD 136 billion).<\/p>\n\n\n\n
![\"\"](\"https:\/\/www.payoff.ch\/wp-content\/uploads\/2026\/05\/payoff-magazine_0526_Grafik_LC_en-1024x615.png\")
<\/figure>\n\n\n\nWhat are Sukuk?<\/h3>\n\n\n\n
Sukuk are an Islamic financial instrument also referred to as “Islamic bonds”. Unlike conventional bonds, which pay interest, Sukuk are based on the principle of sharing in the economic performance of receivables, lease agreements, projects, companies, or partnerships. This means that investors acquire a share in a tangible asset or project and benefit from its returns, such as rent or lease income. Naturally, Sukuk must always be structured in a way that complies with Sharia principles.<\/p>\n\n\n\n
Different forms<\/h3>\n\n\n\n
Sukuk can relate to various areas of application. The main types are: <\/p>\n\n\n\n
- \n
- Lease-based bonds<\/strong> (Ijara-Sukuk)
This form is based on lease agreements, with the income derived from the leasing of an asset.<\/li>\n\n\n\n- Trade-based structure<\/strong>\u00a0(Murabaha-Sukuk)
Investors finance the purchase of goods, which are then resold at a mark-up.<\/li>\n\n\n\n- Partnership interest\u00a0<\/strong>(Musharaka-Sukuk)
In this arrangement, several parties join\u00a0 forces to jointly finance a business or project and share in it. Each party contributes capital and shares in both the profits and the losses on a pro rata basis.<\/li>\n\n\n\n- Project financing through a construction contract <\/strong>(Istisna-Sukuk)
In this case, tangible assets such as factories, roads or buildings are financed in advance. However, repayment and profits are only generated once the project has been completed, usually through the sale or use of the finished asset.<\/li>\n<\/ol>\n\n\n\nBoard verifies compliance with the\u00a0criteria<\/h3>\n\n\n\n
As Sukuk invest in real assets that may be subject to fluctuations in value over time, the full repayment of the principal at maturity is not always guaranteed \u2013 unlike with traditional bonds. However, a purchase obligation by a third party or, in some cases, by the issuer provides Sukuk holders with the assurance that the principal will be repaid in full. Another distinctive feature is that Sukuk must be regularly reviewed and endorsed by a board (committee) of Islamic scholars with extensive expertise in Sharia and finance. The boards grant preliminary approval for the objectives and strategy of a product or transaction and provide ongoing oversight and monitoring services to ensure continued compliance with accepted Sharia principles and standards. <\/p>\n\n\n\n
What about the returns?<\/h3>\n\n\n\n
The key question is: can Sukuk returns compete with those of traditional bonds? One benchmark for Sukuk is the Dow Jones Sukuk Index. According to the latest factsheet, this index has grown by an average of around 3.3% per year over the past ten years. An index for global corporate bonds, such as the MSCI Global IG Corporate Bond Index, serves as a useful comparison. Over the same period, this benchmark recorded an average return of 2.2% per year, thus lagging behind the return of the Sukuk Index. This shows that, in terms of returns, Sukuk need not hide behind conventional interest-bearing investments.<\/p>\n\n\n\n
How can investors invest?<\/h3>\n\n\n\n
For retail investors wishing to invest in accordance with Sharia law, ETFs are the simplest vehicle. One example of a Sukuk ETF traded on SIX is the iShares USD Sukuk UCITS ETF Distribution (ticker: SKUK<\/a><\/strong>). The benchmark index comprises 215 Sukuk that meet the standards published by the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and are regularly reviewed. The main regions are Saudi Arabia and the United Arab Emirates, which account for more than 50% of the index. Last year, the ETF generated a return of 7.4%. There are also equity ETFs that invest in Sharia-compliant companies. One example is the HSBC MSCI Emerging Markets Islamic Screened Capped UCITS ETF (symbol: HIEM<\/a><\/strong>). We present this index fund in detail in the “Product News” section on page 14<\/a><\/strong><\/em>.<\/p>\n","protected":false},"excerpt":{"rendered":"
Islamic finance is an alternative to conventional financial investments which is based on religious beliefs and values. But what exactly does it involve, and how can private investors get involved?<\/p>\n","protected":false},"author":7,"featured_media":1445257,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ngg_post_thumbnail":0,"footnotes":""},"categories":[219],"tags":[],"class_list":["post-1445676","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-learning-curve-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445676","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/comments?post=1445676"}],"version-history":[{"count":1,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445676\/revisions"}],"predecessor-version":[{"id":1445680,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/posts\/1445676\/revisions\/1445680"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media\/1445257"}],"wp:attachment":[{"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/media?parent=1445676"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/categories?post=1445676"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.payoff.ch\/en\/wp-json\/wp\/v2\/tags?post=1445676"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
- Trade-based structure<\/strong>\u00a0(Murabaha-Sukuk)