KembaraXtra – Islamic Finance: SC Malaysia’s Definition of Ṣukūk (Simple Explanation with Examples)

SC Malaysia’s Definition of Ṣukūk

The Securities Commission Malaysia (SC Malaysia) defines Ṣukūk in its Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework (2015) as:


Certificates of equal value that evidence undivided ownership or investment in assets, using Shariah principles and concepts endorsed by the Shariah Advisory Council (SAC).


Simple meaning:
Ṣukūk are certificates that give investors shared ownership or investment rights in assets or ventures, as long as the structure follows Shariah principles approved by the SAC of SC Malaysia.

Why SC Malaysia’s Definition Is Considered Broad

• Unlike AAOIFI or IFSB, SC Malaysia’s definition:
  • Does not restrict the type of assets used as underliers,
  • Leaves detailed rules to specific sections of the Guidelines.


• This approach provides greater flexibility for market innovation, while oversight is maintained by the SAC.

Asset Rules for Sale- and Lease-Based Ṣukūk

Applicable to:

• Ṣukūk Bāiʿ Bithaman Ājil
• Ṣukūk Murābaḥah
• Ṣukūk Istisnāʿ
• Ṣukūk Ijārah

(a) Asset and its use must be Shariah-compliant

Simple meaning:
The asset and how it is used must be halal and permissible under Shariah.

Example:

• Allowed: Office buildings, machinery, halal manufacturing plants
• Not allowed: Casinos, alcohol factories

(b) Consent required for encumbered or jointly-owned assets

Simple meaning:
If the asset:

• Is pledged as collateral, or
• Is owned together with another party,
  permission must be obtained before using it for Ṣukūk issuance.

Example:
A building used for Ṣukūk is mortgaged → bank consent is required.

(c) Receivables must be mustaqir and traded on spot

Simple meaning:
If the asset is a receivable:

• It must be established and certain (mustaqir), and
• It must be exchanged immediately for cash or commodities.

Example:
Receivables from a completed commodity murābaḥah sale can be used, but not future or uncertain debts.


Rules for Partnership- and Agency-Based Ṣukūk
Applicable to:

• Ṣukūk Mushārakah
• Ṣukūk Muḍārabah
• Ṣukūk Wakālah bi al-Istithmār

Requirement: Ventures or investments must be Shariah-compliant

Simple meaning:
The business activity financed by the Ṣukūk must be halal and compliant with Islamic principles.

Example:

• Allowed: Renewable energy project
• Not allowed: Conventional banking operations

SC Malaysia’s Position on Financial Assets and Receivables


Acceptance of Financial Assets

According to the Shariah Advisory Council (SAC) of SC Malaysia:

• Financial assets such as receivables and debts arising from Shariah-compliant transactions (e.g. commodity murābaḥah) are permissible underlying assets.
• Ṣukūk backed 100% by receivables may be issued and traded

Example:
Ṣukūk Murābaḥah backed entirely by commodity murābaḥah receivables is allowed in Malaysia.

Comparison with Other Scholarly Views

• SC Malaysia SAC:
  • Allows trading of Ṣukūk with 100% receivables


• Other scholars / standards:
  • Allow trading only if majority of assets are tangible
  • Restrict pure debt-based Ṣukūk trading

Why Malaysia’s Approach Is Significant

• Encourages market depth and innovation
• Supports Malaysia’s role as a global Ṣukūk hub
• Provides regulatory clarity while allowing flexible asset structures

Simple Exam-Friendly Summary

• SC Malaysia defines Ṣukūk as ownership or investment certificates.
• Asset types are not restricted in the main definition.
• Detailed rules are provided in the Guidelines.
• Receivables and financial assets are permitted, even as 100% underliers.
• Trading rules are guided by SAC-approved Shariah concepts.