Sukuk have great potential for promoting risk sharing thereby
increasing savings mobilization and investment, spurring growth
leading to enhanced welfare.
Sukuk is based on an underlying transaction which creates a
close link between financial and productive flows. The financing
must be channeled for productive purposes such as project
financing, rather than for speculative activities. Thus, the risk
exposure is to the project and not to the uncertainties or
activities that have no real economic benefits. This contributes to
greater stability of the financial system.
Moreover, under the risk-sharing principle required, there is an
explicit sharing of risk by the financier and the borrower. This
arrangement will entail the appropriate due diligence and the
integration of the risks associated with the real investment
activity into the financial transaction. The real activity is
expected to generate sufficient wealth to compensate for the
risks.
One of disadvantages is the lack of standardization.