SS 62 · Islamic financial markets

SS 62: Sukuk (exposure draft)

Important: this is a draft, not a final standard

Everything below describes a proposal. AAOIFI issued the exposure draft in November 2023, and it was still under consultation in 2025. Once finalized, issuers are expected to get a transition period of one to three years, and the new rules are unlikely to apply to sukuk issued before adoption. When finalized, SS 62 will replace SS 17 (Investment Sukuk).

What this standard is about

Sukuk are often called Islamic bonds, but they are meant to be different: certificates of ownership in real assets, not loans with interest. Over the years, many sukuk drifted toward bond-like designs, with fixed returns and guaranteed repayment of principal. This draft aims to pull the market back. Its headline change: sukuk must involve a real transfer of asset ownership to investors, a true sale, not paper promises.

Why it exists

Investors and issuers had grown comfortable with structures that removed almost all risk for investors: the issuer kept the assets, paid fixed returns, and promised to buy everything back at face value. Scholars viewed this as diluting Islamic principles, since sukuk are meant to be investment partnership certificates where investors share real risk and reward. The draft rewrites the rulebook to restore that original spirit.

The key rules, simply put (as proposed in the draft)

Legal title to the underlying assets must transfer to the issuing vehicle (SPV) for the benefit of investors. Beneficial ownership on paper alone is not enough.
No explicit or implicit guarantees of capital. Fixed repurchase agreements at maturity, used to assure investors they will get their principal back, would be banned.
Investors share the real rewards and risks of the assets (al-ghunm bi al-ghurm). Returns must reflect how the assets actually perform, especially in partnership-based sukuk such as mudaraba and musharaka.
The market would move from asset-based sukuk, where assets stay on the issuer's books and investors effectively bear the issuer's credit risk like bondholders, to asset-backed sukuk, where investors genuinely own the assets.
Assets must be clearly identified, with periodic disclosures to investors.
Asset transfers must be reflected properly in financial statements, with separate accounting by the issuing vehicle.
Shariah rulings must be embedded in the sukuk documentation, and sukuk that breach the rules could face delisting.

An everyday example

A company wants to raise $500 million. Under the old market practice, it might issue "sukuk" while keeping its factory, paying investors a fixed 5% each year, and guaranteeing to buy back all certificates at face value. Under the draft, this would not qualify. Instead, legal title to the factory would move to an issuing vehicle for the investors, their returns would depend on the factory's actual profits, and no guaranteed buyback at face value would be allowed.

Words to know

Sukuk — certificates representing ownership in real assets or investment activities, not interest-bearing loans.
SPV — special purpose vehicle; a separate company set up to hold assets for investors.
True sale — a genuine transfer of legal ownership, not a sale in name only.
Asset-based vs asset-backed — asset-based sukuk leave assets with the issuer (investors bear issuer credit risk); asset-backed sukuk give investors real ownership of the assets.
Al-ghunm bi al-ghurm — the principle that reward comes with bearing risk.

Source

AAOIFI Shariah Standard No. 62 (exposure draft) — https://www.mdpi.com/1911-8074/18/11/604
FIM Partners white paper on SS 62 — https://www.fimpartners.com/app/uploads/2025/08/FIM-Partners-White-Paper-AAOIFI-Shariah-Standard-No.-62-July-2025.pdf
IFN UK Forum 2026 on SS 62 status — https://www.mondaq.com/uk/islamic-finance/1846150/the-future-of-islamic-finance-insights-from-ifn-uk-forum-2026