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Islamic finance is one of the most rapidly growing sectors of the global financial system. This paper empirically outlines the pure effect of Islamic finance including Islamic banking and Islamic bonds on economic growth in major Muslim countries. Current study has taken up Islamic banks’ assets and Islamic banks’ financing, total value of sukuk issued and real GDP as measuring proxies. For the analysis, PMG of ARDL framework has been utilized. The outcomes of the study revealed that in the long run, Islamic banks’ assets, Islamic banks’ financing and Islamic bonds are significantly correlated with real GDP in Muslim countries.

Islamic finance has started to grow in international finance across the globe, with some concentration in few countries. Nearly 20% annual growth of Islamic finance in recent years seems to point to its resilience and broad appeal, partly owing to principles that govern Islamic financial activities, including equity, participation, and ownership. In theory, Islamic finance is resilient to shocks because of its emphasis on risk sharing, limits on excessive risk taking, and strong link to real activities. Empirical evidence on the stability of Islamic banks (IBs), however, is so far mixed. While these banks face similar risks as conventional banks (CBs) do, they are also exposed to idiosyncratic risks, necessitating a tailoring of current risk management practices. The macroeconomic policy implications of the rapid expansion of Islamic finance are far reaching and need careful considerations.

The main objective of this paper is to examine the impact of Sukuk sector development on economic growth. This study focuses on a sample comprising some Sukuk-issuing countries in the MENA and Southeast Asia regions over the period 1995-2015. To address potential problems of endogeneity and simultaneity, we employ the generalized method of moments (GMM) system proposed by Blundell and Bond (1998). The obtained results indicate that the development of the Sukuk market significantly affects economic growth, even after controlling various measures of the financial market development and classical determinants of economic growth. Furthermore, the findings suggest that the financial and service sectors have a greater impact on economic growth compared to other sectors. Additionally, there is a significant difference observed between the various sectors of Sukuk in the two regions.

A sukuk (an Islamic debt instrument) is reasoned to be equivalent to an index-linked coupon bond that pays coupons with values that are stochastic — depending on a market defined index — has been proposed in Belal Ehsan Baaquie (2018a), Belal Ehsan Baaquie (2020). Oil is one of the most important commodities. The proposed model is studied by taking the index of the coupons to be based on the price of oil, given by Brent Crude Oil Index or WTI (West Texas Intermediate). In particular, a case study is carried out in which fixed coupon bonds issued Petronas are compared with a corresponding sukuk with index-linked coupons. A novel hedging procedure for the index-lined sukuk (coupon bond) can be defined using the underlying commodity on which the index is based: when the sukuk is issued a fixed quantum of the commodity can be allocated and ring-fenced for paying the coupons of the sukuk; the sale of this commodity provides the tangible asset that generates the revenue required for the future payments of the index-linked coupons for a wide variation of the index.

Data on sukuk issued so far shows that the majority of these have fixed coupon payments, which is equivalent to interest bearing fixed coupon bonds. Two mathematical models are reviewed that are proposed for risk-sharing and profit-sharing sukuk that is consistent with the principles of Islamic finance. The proposed sukuk are debt instrument – with stochastic coupons that depend on proxies for the profitability of the issuing firm. The first model is applicable to a sukuk with the issuer depending on a commodity like oil that has a transparent index for its price. An index-linked coupon bond, which is equivalent to a sukuk, pays coupons with values that are stochastic – depending on a market defined index – and has been proposed in Belal Ehsan Baaquie (2018a), Belal Ehsan Baaquie (2018b). The proposed model is studied by taking the index of the coupons to be based on the price of oil, given by Brent Crude Oil Index. In particular, a case study is reviewed by comparing fixed coupon bonds issued Petronas are compared with their corresponding sukuk with index-linked coupons Belal Ehsan Baaquie (2023). The second model is for sukuk issued by publicly listed firms; the coupons depend on the valuation of the issuing firm, which is taken to be a proxy of its profitability Belal Ehsan Baaquie (2020b), Belal Ehsan Baaquie (2020a). An empirical analysis of valuation based sukuk is reviewed to see its comparison with fixed coupon bonds Belal Ehsan Baaquie and Muhammad Mahmudul Karim (2022).

The study aims to propose a framework for disclosing sukuk risks, show the types of risks to which sukuks are exposed in the various literatures, and how to disclose sukuk risks in international standards such as IFRS, IFSB Standards, and AAOIFI Standards. The chapter deals with the disclosure of the risks of sukuk in the accounting standards divided among the following. First is in IFRS, which focused on the various risks to which conventional Islamic financial instruments are exposed in general, such as market risk, credit risk, liquidity risk, and other risks. Second is AAOIFI Standards that focus on the risks of Islamic financing formulas in general on the basis of which sukuk are issued. Third is IFSB Standards, which focused on the risks of non-compliance with Islamic law and legal risks to which sukuk are exposed. In addition, the chapter deals with a case study of Qatar Islamic Bank, an attempt to obtain field evidence about the level of banks’ disclosure of sukuk risks through the annual reports of the Bank. The researchers found that the disclosure of sukuk risks in Qatar Islamic Bank was very limited, as well as the focus on the disclosure of sukuk risks was on quantitative disclosure, while the descriptive disclosure of sukuk risks is very limited. The researchers proposed a framework for disclosing the risks of sukuk, which is divided into quantitative risks and descriptive risks.

This chapter focuses on analyzing the investment intention of millennials on Sukuk using Theory of Planned Behavior (TPB) that presents attitude toward behavior, subjective norm, and perceived behavior control. The other variables used are religiosity, knowledge, and risk perception. The respondents of this study were millennial generation from age 27 to 35 years. The analysis used was Structural Equation Modeling-Partial Least Square (SEM-PLS). The results disclosed that religiosity influenced millennial behavior toward Sukuk investment. Meanwhile, knowledge had no significant effect. The variables affecting the intensity of Sukuk investment were behavior and subjective norm. While religiosity, knowledge, behavior control, and risk perception had no significant effect. This study shows that the relation between religiosity to attitude toward behavior involves a positive and significant response, meaning that religiosity has an important role in a person’s attitude to invest in Sukuk. Sukuk, as an Islamic financial instrument, has an appeal to investors who hold to Shari’ah principles through the aqad (terms) they offer. The relation between attitudes toward behavior involves a positive and significant effect on intention, meaning that attitudes toward behavior have an important role in a person investing in Sukuk, especially among the millennial generation. The relation between subjective norms has a positive and significant outcome on intention. It means that subjective norms have perception which has an important role in a person investing in Sukuk, especially for the millennial generation. Millennial generation intends to follow the point of view of others they think are important. This research is first of a kind attempt to analyze the investment intention of millennials on Sukuk using TPB.

The Islamic capital market has seen tremendous growth at the global level and especially in Muslim countries. The government of Indonesia and its central bank are trying to develop the Indonesian Islamic capital market. Particularly during the COVID-19 pandemic, the government took a number of steps to improve the state of the Islamic capital market. However, the major focus was on achieving maqasad al-shari’ah. A number of incentives and attractions were created for investors. Consequently, both Muslims and non-Muslims are seeking and investing in shari’ah-compliant products that serve their needs. This chapter discusses the following in detail: the Islamic capital market, different types of sukuk, cash waqf, the efforts of the Indonesian government in the development of halal value chain, Islamic finance, micro, small, and medium enterprises (MSMEs), and digital economic activities under the umbrella of the Islamic capital market. This chapter also examines the achievement of the government toward the development of maqasad al-shari’ah.