A Comparative Analysis between Asset Based and Asset Backed Sukuk: Which One is More Shariah Compliant?

The purpose of this study is to conduct a comparative analysis between asset based and asset backed sukuk structures from shariah perspective. The study is also intended to find out the reasons why asset based sukuk structure is still dominant in the market despite the critics that have been raised by many scholars since 2008. The two structures are compared in their technical and commercial features using library/literatures based methodology, which is a qualitative approach. It is found that asset backed sukuk structure is more compliant to shariah both in form and substance than asset based structure. This study also found that there are three categories of reasons that can explain why asset based sukuk structure is still dominant in the market up to 2012 namely shariah, legal framework and market demand. The study is intended to increase public awareness in the importance of compliancy to shariah not only in the form but also in substance. This study is also expected to benefit regulators in the sense that they should amend some of their regulatory frameworks to push the sukuk market players to move towards asset backed structure.