The Idealization of Risk-Profit Sharing in Partnership-based Sukuk: then Why Default?
This paper critically evaluates the practice of partnership-based or equity-based sukuk (Islamic bonds) structure in
light of the problem concerning default. A closer examination the structure of musharakah (joint venture) sukuk that practice
in the market has demonstrated ‘why’ sukuk are experiencing default situations. While ideally the element of risk avoidance
and profit-sharing should present in the structure, due to market presssure, these structural features practically turned the
equity-based profit-and-loss-sharing arrangements into fixed-income instruments. Ultimately, the structure that should
practice ‘no concept of fixed obligation’ has in fact defaulted on its obligations.
Index Terms - Sukuk (Islamic bonds), Shariah (Islamic law), default, profit-sharing