The Securities and Exchange Commission (SEC) is set to release guidelines for sukuk issuances in the Philippines, a key step in the government’s push to develop the Islamic capital market and expand local investment options.

The SEC has opened its proposed guidelines on the issuance and disclosure of sukuk for public comment, which aim to ensure regulatory clarity, Shari’ah compliance, and strong investor protection.

Sukuk, the Arabic term for financial certificates, are essentially Shari’ah-compliant bonds. They differ from conventional bonds as they represent a share of ownership in a tangible asset rather than a debt obligation.

The draft introduces enhanced disclosure standards, clearer Shari’ah governance mechanisms, and strengthened investor safeguards that align with global sukuk practices.

The rules will apply to all non-exempt sukuk issuances under Section 9 of the Securities Regulation Code (SRC). Sukuk intended for public offering must be registered with the Commission and may be listed, traded, and settled on an SEC-registered exchange or other organized market.

Special Purpose Entities (SPEs) may be created specifically for sukuk issuances. These SPEs must be incorporated separately from the originator, registered with the SEC, and established primarily to hold the underlying assets for sukuk holders while adhering to international Shari’ah standards.

Beyond SPEs, eligible sukuk issuers include publicly listed and non-listed stock corporations; the national government, its agencies, instrumentalities, and local government units; Government-Owned and -Controlled Corporations (GOCCs); and banks supervised by the Bangko Sentral ng Pilipinas (BSP), including Islamic banks. SPEs formed by these entities are also eligible, consistent with SRC exemptions.

The issuance of sukuk can utilize various Shari’ah-compliant structures. These include Sukuk Ijarah, a lease-based structure where assets are sold and leased back to the issuer; Sukuk Murabahah, used for fixed-price sales transactions representing cost-plus-margin financing; and Sukuk Istisna, which provides financing to raise funds for manufacturing or construction projects.

Other permitted structures are Sukuk Wakalah bil Istithmar, an agency-based investment; Sukuk Mudarabah, a profit-sharing arrangement; and Sukuk Musharakah, a joint venture or co-ownership structure. Other structures may be allowed upon SEC approval.

Issuers must either establish an in-house Shari'ah Committee or appoint an external Shari’ah Advisor. This entity will certify that the sukuk structure and underlying assets comply with Islamic principles.

This oversight mechanism provides guidance from issuance to maturity, including ongoing monitoring and auditing of Shari’ah compliance. This is intended to uphold market integrity and build investor confidence in the new instruments.