Sukuk are typically structured based on some shari’ah-permissible contract (named and unnamed contracts) or a combination of shari’ah-compatible contracts. Underlying contracts include murabahah, salam, istisna’a, ijarah, musharakah, mudarabah, wakalah, bai bithaman ajil (BBA), and so on. An issuer’s preference of the type of contract depends on discretionary factors in addition to other factors such as the financial objectives of the issuer, the availability of assets and the amount of debt that the issuer owes, the credit rating of the issuer, the legal framework in its jurisdiction and the tax implication of a given sukuk structure.

The sukuk types may also depend on the type of an issuer (corporate, sovereign) or other features of the sukuk (exchangeable sukuk, convertible sukuk, subordinated sukuk, asset-based sukuk, stapled sukuk, and project finance sukuk). Different structures can result from the combination of different aspects/ features of an issuer and a specific contract. For example, under the category of corporate sukuk, a number of sukuk structures can be built up such as murabahah corporate sukuk, ijarah corporate sukuk, salam corporate sukuk, and so on. Similarly, under the category of convertible sukuk, the underlying contract could be ijarah, musharakah, mudarabah, etc. In addition to the above sukuk structures, sukuk are usually classified as asset-based sukuk and asset-backed sukuk (see: asset backed sukuk versus asset-based sukuk).

According to the underlying contract, sukuk structures can be classified as: sale-based sukuk, lease-based sukuk and equity-based sukuk:

Sale-based sukuk:

As the name implies, the underlying contracts of this type of sukuk belong to the general category of sales (buyu’) which include murabahah, salam, istisna’a, ba’i bithaman ajil (BBA), etc. Salam sukuk are popular in the GCC region (e.g., salam sukuk issues in Bahrain), while murabahah and BBA sukuk are widely used in Malaysia. Sukuk structures that use different forms of sale contract are, thus, dividend into: murabahah sukuk structure, salam sukuk structure, istisna’a sukuk structure and BBA sukuk structure. These structures help easily achieve stability and certainty of return and capital redemption.

Lease-based sukuk:

This class of sukuk structures are based on the contract of ijarah (Islamic lease). Unlike sale contracts that involve transfer of ownership from the seller to buyer against payment of the price, ijarah contracts, per se, do not transfer ownership, but rather the usufruct (manfa’ah), subject matter of the contract. The ijarah sukuk structure can be modeled on simple ijarah, sale and leaseback, lease and leaseback, and any applicable type of ijarah. The underlying assets in lease-based sukuk cannot be reused until maturity date. Stability and certainty of return and capital redemption are easily ascertained when sukuk are structured using lease-based contracts.

Equity-based sukuk:

Sukuk can also be structured using equity-based contracts such as musharakah, mudarabah, and wakalah. Consequently, there are musharakah sukuk structure, mudaraba sukuk structure, and wakalah sukuk structure. As shari’ah doesn’t permit guarantee of capital or return in these structures, equity-based sukuk are usually embedded with a number of credit enhancements in order to maintain some level of return stability and capital redemption certainty. The equity-based contracts and instruments can be used to structure an equivalent of fixed income return insofar as the underlying venture generates positive cash flows (fixed or floating).