If you have looked at the Investments screen in TAANO, you will have seen the word Sukuk. It is one of the most common Shariah-compliant ways to invest, and one of the least understood.
A share in something real
A conventional bond is a loan: you lend money and are paid interest. Interest is not permitted in Islamic finance, so a Sukuk is built differently. When you buy a Sukuk you own a share of a real asset or project, such as a building, a road or a piece of infrastructure.
How you earn
Instead of interest, you receive a share of the income that asset produces, such as rent or usage fees, for as long as you hold the Sukuk. At the end of the term the asset is sold or redeemed and your capital is returned.
What to check before you invest
- Who issued it. Government Sukuk are generally considered lower risk than corporate ones.
- The term. Your money is committed for a set period, often three to five years.
- The expected return, and that it is an expectation, not a promise.
- That a Shariah board has approved it.
In TAANO, each Sukuk and Islamic fund shows these details before you invest, and you can start from small amounts. As with any investment, the value can go down as well as up, so invest money you will not need in a hurry.
