A’uzubillahi minas syaitonir rajim

Dr. Sami Al-Suwailem
Acting Director General, Islamic Development Bank Institute (IsDBi),

Brother Ijlal Ahmed Alvi
Chief Executive Officer of the International Islamic Financial Market,

Distinguished Guests,

3. This time around I wish to highlight three (3) points on diversification of sukuk specifically on structures, issuers and investors of the new sukuk tokens.

4. There are various structures of sukuk namely ijarah, musharakah, murabaha, wakalah, musawamah, to name a few. Each structure can be tailored to meet the specific needs of the issuers and investors, while adhering to Shariah principles. At the same time, there are hybrid sukuk structures that are positioning itself in the sukuk market industry. Hybrid sukuk as we know are a type of sukuk structure in which the underlying pool of assets consists of two or more Islamic finance contracts. We believe that these structures are suitable for sukuk token or digital tokens as they are for traditional sukuk which in fact enhances it with standardisation, efficiency, and transparency through the use of blockchain, depending on the particular needs of an institution.

5. In this connection, I wish to highlight here that IIFM in its effort to facilitate Shariah harmonisation, has published two (2) standard product templates on sukuk, namely sukuk al-Ijarah and sukuk al-Mudarabah. These standards offer Islamic financial institutions with a comprehensive set of widely accepted and legally sound financial documents and product confirmations. As a result, Islamic financial institutions can benefit significantly from being IIFM members and adopting its standards. We sincerely hope that more Islamic financial institutions would join the IIFM and play an active role in deliberating and shaping the standards being developed by the IIFM.

6. In terms of diversification of issuers and investors, digitalising the sukuk via sukuk tokenization opens to a new spectrum of issuers and investors. Tokenisation makes it possible to materialise and unitize existing assets from the physical world to the digital world. This could lead to new business models and potentially as a new means to raise investments or fundings in the future, therefore diversifying the issuer to include the smaller and medium enterprises. Essentially, digital sukuk allows new types of issuers to tokenise their assets -- similar to investment in sukuk -- where a digital token is created on a blockchain that supports smart contracts to represent interest in the underlying assets, beneficial ownership and constructive possession. Smart contracts also determine how the token can be purchased, traded and sold in a compliant fashion, and since they are blockchain based, the transactions are immutable, traceable and fully transparent. The Artificial Intelligence or AI technology at work will ensure the Shariah compliance is end-to-end with less human intervention.

7. In terms of investors diversification, digital sukuk provides greater accessibility to retail investors. Traditionally, sukuk issuance has been limited to institutional investors and high-net-worth individuals due to the minimum investment requirements and the complexity of the process. However, digital sukuk can be easily traded on digital platforms, which can open up investment opportunities to a wider range of investors, including retail investors. Retail investors can participate in more bite-sized sukuk offerings with lower investment amounts, allowing them to diversify their investment portfolios and potentially benefit from the returns generated by sukuk that is certainly more cost effective.

8. By leveraging on digital technology and blockchain, digital sukuk can provide a more user-friendly and simplified investment experience for retail investors, making it easier for them to research, invest, and manage their sukuk investments. Nevertheless, it is important for retail investors to conduct their due diligence and understand the risks associated with investing in sukuk, as with any investment. They should also ensure they comply with any regulatory requirements and seek professional advice if needed.


10. Labuan IBFC has much to offer to the global financial world. As we continue to grow our digital ecosystem, some of these opportunities can be further explored with the hope that insights can be gained on the benefits and usefulness of such offerings, insyaAllah. It is certainly an exciting time, to be at the dawn of the next phase of evolution of the sukuk offering to witness the sukuk token or digital sukuk taking shape.

11. On that note, I end my speech by wishing you a fruitful and engaging webinar ahead. Thank you and wabillahitawfik walhidayah wassalam W.R.T.