Sukuk are often called "Islamic bonds" — but they work fundamentally differently from conventional bonds. Instead of lending money and earning interest, Sukuk holders own a share of an underlying asset (like real estate, infrastructure, or a business project) and earn returns from that asset's profits.
For example, a government might issue Sukuk to fund a highway. Investors buy certificates representing partial ownership of the highway. As the highway generates toll revenue, investors receive their share. At maturity, the government buys back the certificates.
The global Sukuk market has grown to over $800 billion in outstanding issuances. Malaysia is the world's largest Sukuk issuer, followed by Saudi Arabia, Indonesia, and the UAE. Sukuk are increasingly popular with both Islamic and conventional investors seeking portfolio diversification.