Sukuk Defaults and Implications on Malaysian Capital Market

Sukuk have become increasingly popular as a feasible and viable shariah-compliant long-term financing instrument. Being the leader in sukuk market, Malaysia is committed to evolve its financial services sector to serve the needs of businesses and consumers, as well as to increase its appeal in the regional and global market shares of selected niches, in particular, the sukuk market. Sukuk markets around the world are growing to becoming significant sources of capital even though a series of high profile sukuk defaults in the Gulf Corporation Countries (GCCs) had tarnished the market's confidence on sukuk. Malaysia had also recorded several cases of sukuk defaults such as of Johor Corporation, Ingress Sukuk Berhad, Tracoma Holdings Berhad and Nam Fatt Corporation Berhad. The issue of sukuk default is very crucial since it affects the welfare of its stakeholders. Identification of default risk in sukuk is important for supervision and risk management purposes. Certainty with regard to th