An Analytical Review of the Extent of Shari’ah Compliance in Sukuk Structuring through AAOIFI Standard No. 17 under the Saudi Regulatory Framework

Abstract

Islamic sukuk are crucial instruments in Islamic finance, helping diversify capital sources. However, they still face challenges regarding Sharia compliance and alignment with regulatory frameworks. This study aims to analyze the Sharia compliance in sukuk structuring based on AAOIFI Standard No. 17 and compare it with the regulatory framework in Saudi Arabia. Using a comparative analytical approach, the study reviews relevant literature, analyzes regulatory texts, and compares their application in the Saudi market. The findings reveal that there are commonalities between the AAOIFI standard and the regulations governing sukuk in Saudi Arabia, such as the real ownership of assets and the need for ongoing Sharia supervision throughout the sukuk process. However, there are gaps in procedures related to trading aspects and other elements. Based on these results, the study recommends the swift development of a specific law or regulation that clearly outlines the issuance stages and creates monitoring mechanisms that evolve with sukuk developments. This would improve transparency and enhance trust among sukuk investors in the Saudi market. Additionally, the study suggests creating mandatory guides and application manuals, including standardized templates for Sharia audit reports, post-issuance disclosure requirements, and mechanisms for handling deviations.