What are sukuk? How Islamic bonds work, with government examples

Sukuk in one paragraph

Sukuk are the Islamic finance counterpart of bonds. Malaysia’s Securities Commission (SC) defines them in its guidelines as “certificates of equal value evidencing undivided ownership or investment in the assets using Shariah principles and concepts endorsed by the SAC”, its Shariah Advisory Council. The SC’s investor-education website puts it more simply: “A bond that is issued in compliance with Shariáh principles is known as Sukuk.” Both governments and companies issue them.

This guide explains how sukuk are built and what to check before buying one. Whether a particular issue is acceptable to you is a question for the scholar or Shariah board you follow; we make no rulings.

How a sukuk differs from a conventional bond

A conventional bond is a loan: the issuer pays interest and repays the face value. The SC describes the Islamic capital market as one “free from activities prohibited by Islam such as usury (riba), gambling (maisir) and ambiguity (gharar)”. So instead of a debt that earns interest, a sukuk gives its holders a share in an asset, a lease or a business activity, and the payments come from what that asset earns.

Nigeria’s government sukuk shows what this looks like in practice. Its May 2025 offer was a “Forward Ijarah (Lease) Sukuk”: holders receive rent, not interest — the offer states a “Rental Rate: 19.75% Per Annum”, paid half-yearly — and get their money back in a single payment at maturity. The money raised was set aside for building and repairing roads and bridges. Bahrain’s central bank issues “Ijara Murabaha Sukuk”, which combine a lease (ijarah) with a cost-plus sale (murabaha).

Much still looks familiar: a fixed term, regular payments and repayment at the end. The SC notes that sukuk holders, like bondholders, “are entitled to receive periodic coupon or a return on the principal or nominal amount raised by the issuer and upon maturity, the principal amount will be returned”. Sukuk documents may call that payment a profit or rental rate rather than a coupon: Bahrain’s guidelines speak of a “profit/coupon rate”, Nigeria’s offer of a “Rental Rate”.

The risks are the same as for bonds

An Islamic structure does not remove investment risk. The SC’s investor guide lists, for bonds and sukuk alike:

• Credit risk: the risk that the issuer “is unable to pay the coupon/ distribution payments on the specified dates or the repayment of the principal amount to the holder at maturity”.
• Interest rate risk: “a rise in interest rates will result in the lowering of the price of bonds”. If you sell before maturity, the market sets your price.
• Market risk: price changes driven by “the demand and supply of bonds in the market”.

A government sukuk is only as reliable as the government behind it, and one issued in local currency loses value in dollars if that currency falls. Our guide on treasury bills and government bonds explains prices and yields, which work the same way.

Government sukuk open to individuals

The details below come from official pages read on 18 October 2026. Every new issue has its own terms and rate.

• Nigeria: the Debt Management Office’s FGN Roads Sukuk offer of May 2025 was a 7-year ijarah sukuk sold in units of N1,000, with a minimum subscription of N10,000. Rent was paid half-yearly, the sukuk was to be listed on the Nigerian Exchange and FMDQ, and it was certified by the Financial Regulation Advisory Council of Experts of the Central Bank of Nigeria. The 19.75% rental rate belonged to that issue; later issues set their own.
• Bahrain: the Central Bank of Bahrain issues “two different types of securities: conventional; and Islamic”. Individuals take part through licensed banks or brokers licensed by Bahrain Bourse, and must ask that institution for its minimum amount, because subscription policies “may vary between financial institutions”. For sukuk, “the profit/coupon rate is predetermined”, and orders are allotted pro rata.
• Egypt: the Ministry of Finance’s auction schedule for the week of 13 October 2026 included a 3-year sukuk next to treasury bills and bonds. We found no official page we could read on how individuals can buy it.
• Malaysia: retail bonds and sukuk “may be issued and traded either on the exchange (Bursa Malaysia) or over-the-counter (OTC) via appointed banks”.

Questions to ask before you buy

1. Which structure is it — ijarah, murabaha or another — and which asset or activity produces the payments?
2. Who certified it as Shariah-compliant? In Malaysia, the law gives the SC’s Shariah Advisory Council the power to issue rulings; Nigeria’s offer names the central bank’s advisory council.
3. What happens if the issuer cannot pay: do holders have a claim on the asset, or only on the issuer?
4. Can you sell before maturity, where, and at what cost?
5. What is the minimum, and how are the payments taxed where you live?

The SC’s advice applies to any issue: you “should not make a decision to invest unless you have read and understood the prospectus.” For screening shares rather than sukuk, see our guide on Sharia-compliant investing.