RISK DIMENSIONS IN SUKUK STRUCTURES:A CONCEPTUAL FRAMEWORK OF UNDERLYING SHARIAH CONTRACTS

Abstract

The growth of the sukuk market in Malaysia has increased the need for a comprehensive understanding of risk characteristics associated with different Shariah-based structures. However, existing sukuk risk studies classify risks into general categories without sufficiently explaining how risk exposures differ according to the underlying Shariah contracts. This study addresses this conceptual gap by examining the contract-specific risk dimensions embedded within sukuk structures in Malaysia. Grounded in Islamic Contract Theory (Fiqh al-Muʿamalat), Agency Theory, and the Risk-Sharing Paradigm of Islamic economics, this conceptual study analyses the contractual characteristics and risk exposures of major Shariah contracts used in Malaysian sukuk, including ijarah, musharakah, muḍarabah, murabaḥah, wakalah, istisnaʿ, and hybrid structures. Hence, the study proposes the Shariah Contract-Specific Risk Categories (SCSRC) framework, which maps Shariah contracts with their corresponding risk profiles and mitigation mechanisms. The findings demonstrate that sukuk risk is fundamentally contract dependent. The study further highlights the importance of contract-specific mitigation strategies, including strengthened Shariah governance, enhanced disclosure practices, asset segregation, and appropriate credit enhancement mechanisms. The proposed SCSR framework is expected to contribute to Islamic capital market literature by providing a structured approach for assessing sukuk risk from a Shariah contract perspective. It provides a practical reference for regulators, issuers, Shariah advisors, rating agencies, and investors to enhance risk assessment, strengthen governance, and improve sukuk structuring, thereby supporting the sustainable development of Malaysia’s sukuk market. This study contributes to SDG 9 by supporting resilient financial infrastructure, promoting innovation in sukuk structuring, and strengthening the sustainability of Malaysia’s sukuk market through contract-specific risk assessment.