Who Else Is Watching the Names on a Sukuk Board?

Last week I asked a question about sukuk pricing. When investors accept less from a sukuk with famous scholars on its board, do they pay for reassurance, or for a seat in a crowded order book?

That piece answered "Lending Leniency", a paper by Paolella, Sharkey and Syakhroza. The paper finds that sukuk endorsed by more scholars with the title "sheikh" pay lower coupons. The authors read this as investors paying for moral comfort.

I have since gone back to the evidence, and three points deserve a closer look. The first is the investor who has few other places to go. The second is that most of the sukuk market is domestic. The third is a question the paper does not ask: what do regulators make of famous names?

The investor with few other places to go

Rating agencies now describe this investor in plain terms. In a commentary on African sukuk, Fitch Ratings wrote that Egyptian Islamic banks "had faced a lack of sharia-compliant investment options". Egypt's local-currency sukuk helped to attract their demand.

South Africa shows the same pattern. Its Shariah-compliant funds managed more than USD 6 billion in the first seven months of 2026. Yet, in Fitch's words, "sukuk investment options remain scarce".

Fitch also expects the sukuk recovery to continue to the end of 2026. It names "sustained demand from Islamic investors" as one of the two drivers. In July, it reported that GCC investment-grade sukuk had lower yields than bonds.

Order books tell the same story, even where credit is weak:

• Benin. The country's debut USD 500 million sovereign sukuk in 2026 had no rating, yet it was more than eight times oversubscribed.
• Nigeria. A naira sovereign sukuk in May 2025 was seven times oversubscribed.
• United Arab Emirates. The first issue of the retail sovereign sukuk programme drew AED 445 million of orders against a target of AED 50 million. Small tickets of AED 10,000 or less made up 76% of the demand.

This evidence does not disprove the paper. It shows how much demand comes from investors with few alternatives. A study that wants to measure the value of a famous name must first separate it from this demand.

Most of the market is domestic

The second point concerns where sukuk sit. The IIFM Sukuk Report 2026 puts global sukuk outstanding at USD 1.02 trillion at the end of 2025. Domestic, local-currency sukuk made up USD 734.93 billion of that, and international, hard-currency sukuk USD 280.58 billion. So about seven in every ten dollars of outstanding sukuk are domestic.

The paper's data come from a database of sukuk listed on global platforms, and the authors say the sample covers about 40% of yearly issuance by value. My reading is that such a sample leans towards international deals, where global order books and famous names matter most.

Currency matters for a second reason. Dollar sukuk price off US Treasuries, and that gap moves. Fitch reports that the spread between GCC investment-grade sukuk yields and Treasuries was 90 basis points on 8 April 2026. It fell to 66 by 2 September and rose to 88 by early October.

Moves of that size happen within one year. A model that controls only for the year and the calendar month of issue cannot capture them.

What regulators make of famous names

The paper treats a scholar who sits on many boards as a mark of status. At least one regulator treats the same fact as a governance risk and limits it.

The clearest case I have read is in the UAE. The Central Bank's standard on Shariah governance for takaful companies limits each member of a company's internal Shariah supervision committee in three ways:

• A member may hold no more than three such seats in UAE takaful companies.
• A member may hold no more than fifteen equivalent seats in total, across Islamic financial institutions and takaful companies inside and outside the UAE. Only one member of each committee may exceed this limit.
• A member may serve the same company for no more than twelve consecutive years.

These limits apply to takaful companies, not to sukuk issuers. But they show how one supervisor reads a busy scholar.

Other markets set no such limits. An IFN special report on the UK by Ali Mushtaq notes that scholars who serve several banks raise confidentiality and conflict-of-interest concerns, "with no disclosure requirements under English law". Writing in IFN about tokenised products, Saif Khan observes that "a relatively small number of highly credentialed scholars serve on a large number of boards simultaneously".

The same fact therefore has two readings. To the paper, a scholar in demand sends a signal that investors value. To a supervisor, a scholar in demand concentrates judgement, and possibly conflicts, in one person. Both readings can hold at once, but they lead to different questions. A researcher asks what the name is worth. A supervisor asks what happens to the market if that name gets a ruling wrong.

From signature to design

The paper's own interviews describe a familiar sequence. Bankers and lawyers design the sukuk, and internal Shariah staff screen it. The external scholars then give the final approval. In that sequence, a famous name works like a signature at the end of the process.

Malaysia is moving the other way. According to an IFN report from August 2026, the Securities Commission Malaysia has issued a Guidance Note on Sukuk aligned with Maqasid al-Shariah. The note requires Shariah advisers to be involved throughout the design and structuring of a sukuk.

If that practice spreads, the name on a prospectus will carry new information. It will tell investors who shaped the structure, as well as who signed it.

Where the paper may still be right

Most investors cannot evaluate a Shariah opinion. When investors cannot judge the reasoning, they rely on the reputation of the person behind it. That is the paper's mechanism, and it is real. My disagreement is with its size, and with how much else the coupon carries.

The same point suggests a remedy that does not depend on any one scholar. Plain-language disclosure of the Shariah basis of a sukuk would let investors judge the structure as well as the names.

What I take from this

Each of these conclusions can be tested:

• Demand from investors with few alternatives is large and documented. Any estimate of a "sheikh discount" has to separate the two effects.
• Currency and market segment matter. A study that pools local-currency and dollar sukuk needs to show that its result holds within each.
• Board limits, design involvement and better disclosure should, in my view, reduce what a famous name is worth. If the discount survives those changes, the paper's case becomes much stronger.

So, I end with a new question. If regulators spread Shariah judgement across more scholars and more disclosure, will investors still pay for the signature, or will they start to read what it signed?

Disclaimer: The views expressed in this blog are not necessarily those of the blog writer and his affiliations and are for informational purposes only.

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