What is the ruling on bonds and sukuk?

Conventional bonds are impermissible: a bond is a loan on which the issuer contractually returns the principal plus a fixed or floating extra, and any stipulated increase on a loan is ribā by consensus. Sukuk were designed as an alternative in which the holder owns a real share of an asset or venture and takes its profit and its risk, and in that genuine form they are permissible. However, many instruments marketed as sukuk are structured with a purchase undertaking that guarantees the holder's capital and a fixed "rental" return, so the investor bears no real ownership risk — several senior contemporary bodies, including AAOIFI's Sharīʿah Board, have criticised these as bonds in substance, and rulings follow substance, not labels. The basis is Allah's word, "Allah has permitted trade and forbidden ribā" (Qurʾan 2:275) and "you are entitled to your principal sums — you neither wrong nor are wronged" (Qurʾan 2:279), alongside the Prophet's ﷺ ruling that "revenue goes with liability" (al-kharāj bi'l-ḍamān), i.e. one is only entitled to the return on an asset if one carries the risk of its loss.

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