New AAOIFI Sukuk Standard Could Reshape the $1 Trillion Islamic Debt Market

The global Sukuk market, valued at over $1 trillion, is on the brink of a major transformation as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) prepares to implement Shariah Standard No. 62. This new standard aims to tighten Shariah compliance by requiring the actual legal transfer of underlying assets to Sukuk holders — a move that could significantly alter how Islamic bonds are structured and issued globally.

📑 What Is AAOIFI Proposing?

AAOIFI’s Shariah Standard No. 62, still under final review as of early 2025, introduces stricter requirements for the legal enforceability of asset ownership in Sukuk. Key elements include:

• True Sale Requirement: Sukuk structures must reflect genuine ownership, not just beneficial or synthetic claims. This would ensure that investors carry the risks and rewards of the underlying assets in line with Islamic principles.

• Prohibition of Guaranteed Returns: The standard reinforces the risk-sharing ethos of Islamic finance, prohibiting guaranteed periodic payments that mimic interest-based structures.

• Asset-backed, Not Just Asset-based: Sukuk must now be legally asset-backed, requiring issuers to transfer ownership of tangible assets, not just structure profit-sharing around them.

“The aim is to bring Sukuk closer to the true spirit of Islamic finance — fairness, transparency, and ethical risk-taking,” said a Shariah advisor familiar with the proposal.

⚠️ Industry Concerns and Reactions

While the standard’s Shariah intentions are widely applauded, many practitioners fear legal and structural challenges ahead:

• According to the Financial Times, the proposed standard may add legal complexity, especially in jurisdictions that don’t easily recognize Islamic ownership structures.

• It could also fragment the global Sukuk market, as jurisdictions and issuers differ in their ability or willingness to comply.

• The changes may lead to a short-term decline in Sukuk issuance, with smaller or conventional issuers reluctant to adopt the new framework.

Fitch Ratings noted that as of now, the standard has not impacted Islamic banks’ credit ratings, but the lack of clarity on implementation timelines leaves room for uncertainty in the sector (Salaam Gateway, March 2025).

📈 Why It Matters

This proposed reform is not just a technical adjustment — it’s a philosophical pivot. Sukuk, once criticized for mimicking conventional bonds with only surface-level Shariah compliance, may now face a purification process that redefines investor expectations, issuance structures, and documentation protocols.

Islamic economists have long argued for a move away from structures that merely “appear” Islamic, toward truly ethical and Shariah-compliant frameworks that promote social justice, real asset linkage, and risk-sharing.

🔍 Next Steps

AAOIFI has not yet set a public release date for the final version of Standard No. 62. Industry professionals are encouraged to prepare for significant legal due diligence and restructuring in anticipation of the changes.

“Issuers, scholars, and regulators must collaborate closely to ensure a smooth transition — one that safeguards both investor confidence and Shariah principles,” notes Dr. Faiza Raza, Editor-in-Chief at JIBEP.