ACCA Financial Management (F9) Certification Practice Exam

What is the term commonly associated with Islamic bonds?

1. Sukuk

2. Ijara

3. Murabaha

4. Zakat

The correct answer is: Sukuk

The term commonly associated with Islamic bonds is "Sukuk." Sukuk represents a financial certificate that is essentially Islamic law-compliant and serves as a way for investors to participate in the ownership of underlying assets, ensuring that transactions are conducted in a Sharia-compliant manner. Unlike conventional bonds, which typically involve interest payments that are prohibited in Islamic finance, Sukuk provides returns to investors that are derived from the performance and income of the underlying asset, aligning with the principles of risk-sharing and ethical investment in Islamic finance. The other terms, while related to Islamic finance, refer to different concepts. Ijara refers to a lease agreement, often used for asset financing. Murabaha is a sales agreement where the seller discloses the cost and profit margin to the buyer, commonly used in trade financing. Zakat is an obligatory form of almsgiving in Islam, representing a form of wealth redistribution rather than a financial instrument. Hence, Sukuk is the accurate term reflecting Islamic bonds, as it encompasses the characteristics and principles applied within this financial vehicle.