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Bonds and Fixed Income

Guide To Investing In Sukuk, A Shariah-Compliant Bond In Malaysia

There’s a rising interest in sukuk amidst turbulent times.


According to media reports, foreign investments in Malaysian government bonds have grown to RM268 billion in June 2023, from RM253 billion in last June. That’s because there has been an increased interest in fixed income assets as investors try to safeguard their portfolio and minimise risk amid uncertainties.  

The most common form of fixed income assets is a bond. It is a type of debt security whereby investors lend money to the government or a corporation by buying their bonds. In return, the government or corporation pays investors fixed regular interests along with the principal at maturity. As investors are buying bonds issued by the government or large corporations, they are considered to be relatively low risk. 

In Malaysia, you can also invest in sukuk, a form of bond that is compliant to Shariah principles. Based on Islamic values, these principles will govern the formulation and management of investment products. Some elements that may be commonly found in conventional investments are not allowed in Shariah investments.  

Do note that Shariah investments are accessible to everyone regardless of their religion. 


Differences Between Sukuk And Bonds 

The concept of incorporating Shariah into investments existed first in Malaysia and the country has grown into one of the most exciting investment hubs for Shariah-compliant funds.  

One of the financial elements prohibited in Shariah investing is ‘riba’ or interest. A conventional bond is like a loan whereby instead of going to the bank to borrow money, the government or a company seeks out investors. Investors give money to the bond issuer and in return, gets paid in interests for their capital. As interest is not allowed under Shariah principles, there needs to be another way for sukuk to benefit investors. 

With sukuk, it needs to be backed by a physical asset that is part of the investment or project. For example, an airline company could issue a sukuk backed by an aircraft. So, investors now own a part of the asset and will enjoy profits that come from the asset instead of a debt. It goes without saying that the asset needs to be halal. 

There are also some terms used in Islamic finance that are different from conventional finance. For instance, ‘riba’ is interest and ‘mudharabah’ contract is a profit-sharing agreement between one person who provides capital and an entrepreneur who manages the project. 

Ways To Invest In Sukuk 

Sukuk is issued by government or companies as a way to raise financing. A check on Bursa Malaysia’s website revealed that there are 23 sukuk issued by government institutions and private companies. 

There are several ways to invest in sukuk. You can invest directly in sukuk but the investment capital for sukuk is relatively high. Maybank offers sukuk investment with a minimum investment amount of RM250,000 to individuals who has a net worth of RM3 million or companies that have a total net asset of RM10 million. 

Alternatively, an easier and more affordable way would be to invest in a sukuk ETF or sukuk unit trust. Sukuk ETFs invest in a group of sukuk and track the performance of the sukuk indices. Investors can invest in Exchange Traded Bonds and Sukuk (ETBS) on Bursa Malaysia where the minimum board lot size is 10 units per lot size and principal price of RM100 per unit which means that each board lot costs RM1,000 only. 

There’s also the Maybank Malaysia Sukuk Fund, a sukuk unit trust fund that invests in a portfolio of sukuk. Investors can invest in the Maybank Malaysia Sukuk Fund with a minimum initial investment amount of RM1,000. 

Types Of Sukuk  Investment Amount  Features 
Maybank Sukuk  Min investment of RM250,000  Investment requirements – investors need to have a net worth of RM3 million or RM10 million for companies 
ETBS (Sukuk ETF)  Min investment of RM1,000    Invest in basket of sukuk and track the performance of sukuk indices 
Maybank Malaysia Sukuk Fund (Sukuk UT)  Minimum investment of RM1,000 


Invest in a diversified portfolio of sukuk  

Advantages And Disadvantages Of Investing In Sukuk 


Hedge against uncertainties – Investors can diversify their portfolio by investing in sukuk, which is deemed as a low-risk investment. Bonds are less volatile as compared to stocks and are less affected by the highs and lows of the stock market.  

Regular income – By purchasing sukuk, investors are entitled to periodic profit payments (typically semi-annually or annually) on the investment amount until maturity when the principal amount will be returned to investors. 

Capital appreciation – Sukuk holders stand to get capital gain when they sell their bonds in which the price has risen. 

Liquidity – Investors can trade sukuk like stocks even prior to maturity. 

Less risky – There’s a general perception that Shariah investing comes with less risks thanks to its stricter regulations and adherence to positive ethics. 


Default on profit – Like any other investment, there are risks with investing in sukuk as well. The payment of profit does depend on the sukuk issuer’s financial ability and there’s possibility it could fail to pay the principal amount and profit. 

Lower return – Sukuk is a relatively low risk investment and the profits generated tend to be lower than those of stocks. 

Overshadowed by inflation – Sukuk provides long-term regular profits to its holders until maturity. However, if inflation rate surpasses the profit rate, the income from the sukuk may not be sufficient.   

Limited exposure – Shariah-compliant funds are more restrictive than conventional funds which means they may not be as diversified or exposed to certain sectors that do not subscribe to the Shariah principles.     

Should You Invest In Sukuk? 

Sukuk has been deemed as a safe haven during volatile times as it’s not easily affected by market rises and falls. So, sukuk can help diversify and provide some stability to one’s portfolio.  

Sukuk issued by the government is also perceived as safer. However, it’s important to realise that sukuk comes with risks as well as the distribution of profit depends on the financial capability of the issuer or corporation.  


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