The Role of Sukuk in Development Financing: A Comparative Analysis of Sukuk Instruments and Their Prospective Contribution to Development in Muslim Countries with Indonesia in Focus

Sukuk (Islamic bonds) is one of the Shari’ah based financial instruments that has attracted global demand in both Muslim and non-Muslim countries as a driver for economic growth. Conceptually, Sukuk had developed in the classical Islamic economic tradition, although its development paused in the middle due to the stagnation of Islamic civilization. Today, Middle Eastern countries make fairly good use of Sukuk. Recently, Indonesia has also issued the State Sukuk Law, which is a positive sign for the Sukuk development in Indonesia. However, despite its increasing popularity, the possible contribution of Sukuk instruments in economic growth and development of countries is not fully appreciated in the existing studies. Using normative and comparative research methods, this article argues that Sukuk instruments make a significant contribution to such development. As a pioneer in thematic Sukuk based on maqasid al-Shari’ah, Indonesia has the opportunity to become a leader in the growth of the global Shari’ah financial industry and gain investor trust in financing development. Therefore, all stakeholders should fully support it. Globally, thematic Sukuk can guarantee the stability of the financial system because of the support of tangible fixed assets and responsibility in carrying out commitments to environmental and social sustainability. However, a review of Sukuk in different Muslim countries shows that dual regulations (conventional and Shari’ah) are being implemented in debt securities, which undermines the investor trust in Sukuk. This article makes suggestion for a Shari’ah supervisory institution to ensure compliance of Sukuk with Shari’ah principles.