Bonds of the Islamic type

A recent research project of a student involved Islamic finance. This is a financial system that operates according to Islamic law (which is called sharia) and is, therefore, sharia-compliant (background information). The project of the student focused on the Sukuk bonds (background information).
One of the few sources that carries information on bonds is Datastream. At first I tried to get the historical prices etc. through this system but I was only able to find approximately 100 Sukuk bonds by doing a very basic search on the text: Sukuk. Other search options did not seem to get me the specific Sukuk bonds.

I contacted the Thomson Reuters helpdesk and from their answers it is now clear that Datastream (at the moment) is not the best source for information on these bonds. The helpdesk literally said: “We have no specific data type for this. We have very limited coverage of this in Datastream.” and ““I have closely worked with our data team and can confirm that there are no plans to extend coverage in 2014. There are plans to add more markets in 2015 however.
That means, that, for now, Datastream is not an option. A second source on Bonds data, however, proved more useful: SDC Platinum’s Global New Issue database (recent name: Thomson One’s Deals database). In the GNI database I could find Islamic bonds using the variable “Islamic Finance Flag” (available through the All Items search tab). The variable allows you to select these types of bonds.

The variable definition according to SDC is: Islamic Financing Flag (Y/N): A yes/no flag to indicate where the Loan Type of Bond Security Type is Islamic Finance. Islamic Finance transactions are deals that prohibit the making or receiving of interest payments.  Trade financing for these transactions is obtained through the purchase of inventory that will be resold at a pre-determined price on a future date (or “Murabaha”).

Because I do not know all that much about Islamic Finance, at first I thought I needed to limit the search further in the GNI database to get the bonds. Using the variable “Security Type” it is possible to limit the search to Bonds. Using the variable the number of records was narrowed down by a factor of 20 an I was left with only 124. When I removed again the limitation and created a report that included the “Security Type” variable it was clear immediately that most Islamic Finance bonds also have the name “Islamic Finance” as Security Type. In the end I could find about 2450 bonds. The amount of data on these bonds is limited, however.

If you want to have additional historical time series data like prices, you will have to find another source for this. I have seen no examples but I have heard that Bloomberg might be an option.


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