A classification of sukuk that constitutes part of the first or core layer of a bank’s capital (core capital), which, per se, is the so-called tier-1 capital, due to the very nature of the instrument: possessing the features of equity (equity-type sukuk).

For example, a sukuk structure that involves an equity in a venture (on the basis of musharaka/ sharika). Under such as a structure, all the proceeds from the sukuk issuance are deployed by means of a profit generating, profit-sharing agreement (sharika). Such sukuk are either perpetual in nature or convertible to equity. For that purpose, these sukuk come with no put options that would, otherwise, all their holders to put them back to the issuer.

These sukuk classify as tier 1 capital: which by nature constitute the core capital for capital adequacy relating to the issuing bank or financial institution.

These sukuk are also known as tier-1 capital sukuk.