Qatar Central Bank issued sukuk for the first time in 2003. The first issue was US$700 million, which was assigned an A+ rating by Standard and Poor's. The first issuance was made in the International Islamic Financial Market in Bahrain. This particular security had the feature of a floating periodical coupon payment rate because it was pegged to the London Inter-Bank Offer Rate (LIBOR). The coupon rate was set 40 basis points higher than the LIBOR rate. This feature was embedded in the contract to prevent the payment of a fixed rate to sukuk holders, which would have resembled riba.

Qatar Central Bank has issued a few more sukuk securities since then. As of 2013, there were a few outstanding sukuk issued by Qatar Central Bank, including a US$5 billion eight-year-maturity issuance in 2010, a US$33 billion three-year-maturity issuance in 2011, a US$500 million three-year-maturity issuance in 2013, and a US$500 million five-year-maturity issuance in 2013.


Dubai World, a real estate firm of the government of Dubai, issued three sukuk securities to finance the nakheel (palm tree) construction project on the shores of the Persian Gulf. The nakheel sukuk was structured based on the concept of an ijarah contract. This particular issue raised a total of US$3.52 billion for a term of three years and was supposed to mature on December 14, 2009.

However, the world financial crisis, and the subsequent Dubai financial crisis, resulted in the devaluation of the nakheel sukuk. On November 25, 2009, Dubai World approved a US$26 billion debt restructuring, and on November 30 it requested a suspension of trade on the nakheel sukuk until further clarification of its ability to pay it back. Although the nakheel sukuk was suspended from trade for few weeks, it was eventually redeemed. The US$10 billion bailout package from oil-rich neighbor Abu Dhabi helped the Dubai government to back the nakheel sukuk.

This episode shocked the sukuk markets around the world, because it was one of the first billion-dollar sukuk securities on the verge of default before it was saved by a government. The episode sparked a significant debate among practitioners and scholars about the issue of sukuk default and the missing legal framework to deal with this matter. The nakheel sukuk contract had a default clause; however, the clause was not enforceable under UAE jurisdiction, so the case was sent to a British court for resolution. Some Islamic jurisdictions (such as the UAE and other Gulf Cooperation Council countries) lack a clear resolution mechanism for default and solvency matters. This is in contrast to British law, which has a solid enforceable mechanism for such matters.


The Iranian capital market has witnessed Shari'ah-compliant securities in the form of musharakah contracts since 1995. At that time, the authorities labeled them "participatory securities." Their issuances are mostly initiated by the government of Iran, government-linked-companies, or local municipalities (with the guarantee of the central government). With few exceptions, all the issuances are denominated in the local currency. A brief history of the development of Islamic banking and the capital market in Iran was published in 2012.[1]

The first ijarah sukuk in Iran was issued in 2011 by a private airline company, Mahan Airline Company, and it was worth IRR291.5 billion (US$30 million). The purpose was to finance the purchase of an airplane; hence, the underlying asset of this contract is the plane. The issue is a four-year contract that pays a 17.5 percent profit rate on a quarterly basis.

In 2013 the profit rate was increased to 20 percent, mainly because of an increase in the national interest rate. The issue is traded in Farabourse, Iran's over-the-counter market, because of a lack of trade infrastructure in the main market of the country.


These examples show the widespread use of this new form of debt financing by private firms and government agencies. It shows that some issues are using the most common currency, the US dollar, as the issuing currency. Where foreign currencies are used as the issue currency, those markets are developing, as the Eurodollar financial markets did, in six major financial centers in the world.

Another notable feature is that the issues are aimed at the specific needs of the issuers (a distinct feature of Islamic debt structuring)—for example, the need of a real estate developer to fund a large project in the UAE, the need of a private firm to purchase an airline company in Iran, or the need of the government of Malaysia to provide a traded security as a savings instrument. These examples show the variety and specificity of project-based funding that is characteristic of the burgeoning Islamic debt markets.

  • [1] M. Karimzadeh, "Role of Sukuk in the Islamic Capital Market: Experience of Iran (1994-2011)," Arabian Journal of Business and Management Review 1, no. 7 (February 2012): 94-105.
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