Introduction

It has been known that over the years the Islamic finance industry has revolutionized the way Islamic businesses as well as individuals invest, acquire funds and save. The Islamic religion places strict values on regards to monetary discipline thus placing an enormous difference between conventional and Islamic forms of investment. The rising demand for investment options in the form of bonds and securities has led to the use of Sukuk or Islamic securities which have become progressively more acceptable to the Islamic community in some Arabic countries. In almost all Islamic nations, sukuk are used as a means of procuring government finance through autonomous ventures for example infrastructure. Islamic bonds are also used by reputable corporations to secure financial support through the offer of corporate sukuk. Sukuk were initially used to a large extent in the middle ages as tenable documentation in lieu of financial responsibility acquired through business and other commercial endeavors thus they principally symbolized the possession of a given asset or service .

The Background of Sukuk

Sukuk is basically a bond that is complacent with the Islamic Sharia law (Nisar, 2007).It should be known that Sukuk was first introduced into the contemporary Islamic financial industry in the year 2000 with only three sukuk worth three hundred and thirty six millions U.S dollars. As the years progressed, there was a high demand for investment options as Islamic businesses sought to diversify their portfolio (Rabbi, 2010).With the diversification need, Sukuk turned out to be a popular option for many investors and by late 2006 the sum of sukuk was more than seventy with over twenty seven billion U.S dollars secured by the sukuk funds.

Currently, sukuk is one of the most important modes for the acquisition of financial resources not only by Islamic governments but by multinational companies, state businesses and financial organizations that are compliant to the Islamic code of business conduct (Tariq 2004).  With the known prevailing differences in maturation period, investment size and type of ownership, sukuk differ broadly in terms of variety and its application.

The organization in focus is Saudi Basic Industries Corp (SABIC), a corporation that constitutes mainly of manufacturing as the primary activity. Saudi Basic Industries Corp (SABIC) corporation has a diverse product base which mainly constitutes of intermediates, industrial polymers, compound fertilizers as well as metals (Rabbi, 2010). Furthermore, according to the official listing of Tadawul, SABIC happens to be the largest public owned company in Saudi Arabia, with the Saudi Arabian government being the majority share holder of more than sixty percent of the shares (Tariq 2004). SABIC is the lead global producer of existent and new components of fertilizer as well as ingredient chemicals which include MTBE polyether imides, mono-ethylene glycol, coarse urea, and polyphenylene. To add on, SABIC is also the second largest worldwide manufacturer of ethylene glycol and third largest manufacturer, polyolefin, polypropylene and polyethylene (Rabbi, 2010).

The company was in 2008 recognized by Fortune Global 500 as the leading chemical manufacturer in Asia and was placed in fourth position on a global scale (Rabbi, 2010). In 2009, the company became one of the most successful companies in the world after a successful sukuk public offer as well after registering revenues of more than forty billion US dollars, returns of almost six billion US dollars and holder of assets worth more than seventy billion US dollars (Rabbi, 2010).The headquarters of the organization is in Saudi though it has other nineteen affiliate or subordinate organizations through out the globe. SABIC also has a research and technology division which currently has over two hundred and twenty registered patents and a marketing business division (Nisar, 2007).