Domestic borrowing without the rate of interest: gharar and the origins of sukuk

All governments need to borrow from the public. Known as domestic borrowing, this is not an easy process. For Muslim countries, where interest is prohibited, this process becomes extra ordinarily difficult. I will start this article by examining the concept of uncertainty, gharar, in Islam and then move on to the origins of Islamic domestic borrowing, which is referred to in modern parlance as sukuk. The value of modern sukuk issued at the end of 2009 has reached roughly USD 100 billions. While most people think that this is a newly invented instrument, the institutional roots can be traced back for centuries.