CRITICAL APPRAISAL OF SHARIAH ISSUE ON APPLICATION OF INCENTIVE FEE AND INVESTMENT MANAGER ARRANGEMENT IN SUKUK MUSHARAKAH AND SUKUK MUDARABAH

Abstract

The Malaysian sukuk market has experienced significant growth and has become an integral component of the country's capital market. The market's increased dynamism is evident in the development of sophisticated sukuk arrangements that incorporate multiple Shariah concepts to cater to the needs of sukuk issuers. However, certain Shariah issues necessitate further examination to ensure compliance with Shariah. This paper focuses on the Shariah issues related to sukuk musharakah and mudarabah, particularly the application of incentive fees and investment manager arrangements within these two sukuk structures in Malaysia. Additionally, the paper includes case studies and references of existing sukuk in the Malaysian market. The study found that there is inconsistency in the approach taken when applying incentive fees and investment manager arrangements. This lack of consistency can have an impact on the practice of structuring sukuk musharakah and sukuk mudarabah, which is crucial in promoting inclusive and sustainable economic growth (SDG 8) and reducing inequalities in financial practices (SDG 10).