Sukuk Explained: Are Bonds Halal? Best Sukuk ETFs 2026

Last updated: October 26, 2026

Why conventional bonds are not halal

A bond is a loan. Say you give a company or government $1,000. It pays you a fixed percentage every year, then hands back the $1,000 at the end. That yearly extra is a return on money you lent, which is exactly what riba means. The Quran forbids it directly (Al-Baqarah 2:275–279).⁵

AAOIFI is the body that sets Shariah standards for Islamic finance, and its Standard 21 is blunt about this. It bans issuing "all kinds of bonds" that pay back the loan plus anything extra, whether the extra comes as a coupon or as a discount on a zero-coupon bond. Then it adds: "Likewise, prize bonds are also prohibited. This applies irrespective of the bonds being private, public or governmental." Buying, selling and pledging bonds are banned for the same reason.¹

So that rules out US Treasuries, UK gilts, corporate bonds, municipal bonds, and every bond fund made of them (BND, AGG, TLT, VGOV and so on). Clause 6 of the same standard says what to use instead: "The Shari'ah substitute for bonds are investment Sukuk."¹

What are sukuk?

Sukuk (singular sakk, meaning "certificate") are certificates that say you own part of an asset or business activity. Here's AAOIFI's definition of investment sukuk:

certificates of equal value representing undivided shares in ownership of tangible assets, usufruct and services or (in the ownership of) the assets of particular projects or special investment activity.²

The word that matters is ownership. A bondholder lends money, so the issuer owes them whatever happens to the business. A sukuk holder is a part-owner. You get paid from the asset (rent, profit on a sale, or business profit), and you share some of its risk. The same standard says debts can't be turned into certificates and traded, so you can't take a loan, call it a sukuk, and make it halal.²

Sukuk vs bonds

The main sukuk structures

Standard 17 lists more than a dozen kinds of sukuk.² Four of them cover most of what you'll find inside a sukuk ETF.

Ijara (lease). You'll see this one most, especially from governments. The issuer sells an asset, like a building, a plane or a toll road, to a company owned by the sukuk holders. It then rents the asset back and pays them rent, and when the sukuk ends it buys the asset back. Picture a group of friends buying a flat from someone and renting it straight back to them.

Murabaha (cost-plus sale). Holders put up money to buy a commodity. It's then sold on at a mark-up that everyone can see, and the buyer pays later, a bit like a shop selling you something on a fixed-price payment plan. Once the commodity is delivered, all that's left is the buyer's debt. So AAOIFI says the certificate can only change hands at face value, under the rules for debts.² That's why people usually hold murabaha sukuk to the end, and why tradable funds have fewer of them.

Mudaraba (profit-sharing). One side brings the money and the other does the work. Holders put in the capital, the issuer runs a business activity, and profit gets split at a ratio agreed upfront. Losses of money fall on the investors unless the manager was negligent.

Wakala (agency). Like hiring a fund manager with a bonus. Holders appoint the issuer as their agent to invest in a pool of permissible assets for a fee, and if profit beats an agreed target, the agent can keep the extra. Gulf governments and banks use wakala a lot now, because one pool can hold a mix of assets.

The 2008 AAOIFI statement on asset backing

In late 2007, Sheikh Muhammad Taqi Usmani, then chairman of AAOIFI's Shariah Board, said about 85% of sukuk on the market didn't comply with Shariah. His main problem was with mudaraba, musharaka and wakala sukuk where the issuer promised to buy the assets back at face value. That promise guaranteed the holder's money, so economically the sukuk was just a loan.⁶

AAOIFI's Shariah Board answered with a statement in February 2008. Its rules still apply today:⁶

1. Sukuk holders must legally own the assets, with all the rights and duties that come with owning them. The manager has to record the change of ownership in its books.
2. Tradable sukuk can't stand for receivables or debts. The one exception is a trading company selling its whole portfolio, where the debts are a side part of it.
3. A manager acting as mudarib (the one running the business), partner or agent can't promise to lend holders money when profit comes in below what was expected. A reserve account to cover shortfalls is fine if the prospectus says so.
4. That same manager can't promise to buy the assets back at face value at the end. Buying back at net asset value, market value, fair value, or a price agreed at the time is fine.

Ijara sukuk get an exception to point 4. Because the holders own the leased asset and carry the risk of losing it, the tenant can promise to buy it back at face value, as long as the tenant isn't also the partner, mudarib or agent.⁶

This is where you hear "asset-based" versus "asset-backed". Most sukuk today are asset-based. Under Shariah the holders own the asset, but if the issuer defaults they usually end up as unsecured creditors of the issuer. They don't get to take the building. Index providers and fund Shariah boards accept this. Purists don't. If that matters to you, read the Shariah pronouncement in the fund's documents before you buy.

Best sukuk ETFs in 2026

There aren't many. These are the ones we could confirm on issuer pages in October 2026:

HSKG is the GBP accumulating share class. Fees change, so check the latest factsheet before you buy.

SPSK: the only US-listed sukuk ETF

SPSK holds US-dollar investment-grade sukuk and pays out every month. SP Funds reports $476.69 million in net assets and a 30-day SEC yield of 5.04% as of 30 September 2026. The fee is now 0.50%.³

The returns have been poor. To 30 September 2026, SPSK made 0.39% a year over five years and 0.77% a year since launch (at NAV). Its index made 1.32% a year over five years and 2.24% a year since SPSK launched.³ The 2022 rate shock hit every bond-like fund, sure. Still, low volatility hasn't meant steady gains here.

If you're in the US and want sukuk in an ETF, SPSK is the only choice today. We have a separate page on SPSK's compliance and holdings.

HSBC Global Sukuk UCITS ETF: the UK option

HSBC launched this fund in September 2023. It tracks the FTSE IdealRatings Sukuk Index of investment-grade US-dollar sukuk and trades on the London Stock Exchange as HBKU (USD) and HBKS (GBP), with a 0.37% fee, the lowest in this list.⁴ In September 2026 HSBC added a GBP accumulating share class, HSKG, at 0.38%.

For UK investors it's the easy pick: it trades in London, and most platforms let you hold it in a Stocks and Shares ISA. Expect a lot of Gulf exposure. On 30 September 2026, eight of its top 10 holdings were sukuk from the Saudi government, Saudi Aramco or the Saudi Public Investment Fund.⁷

iShares $ Sukuk UCITS ETF (SKUK)

SKUK launched in January 2024 and tracks the J.P. Morgan EM Aggregate Sukuk Index. To get into the index, a sukuk has to be labelled as sukuk and comply with AAOIFI standards. The fee is 0.40%, and it pays out every quarter.⁸ It's listed in Amsterdam and Switzerland, not London, so UK and European investors need a broker with Euronext access. iShares says the fund is ISA-eligible.

Other options to know about

• Amana Participation Fund (AMAPX / AMIPX). A US mutual fund holding short- and medium-term sukuk, murabaha and wakala instruments. Fees are 0.81% for Investor shares and 0.57% for Institutional shares.⁹ It's not an ETF, so you buy it through Saturna or a broker that offers it.
• Amana Sukuk ETF (AMSU). Saturna announced it in May 2026, but its June 2026 ETF prospectus only covers the three equity ETFs.¹⁰ Check AMSU is actually trading before you plan around it.
• HLAL, SPUS, MNZL and other halal equity ETFs hold stocks, not sukuk. Our halal ETF comparison covers those.

Halal cash: savings accounts and money market funds

Bonds aren't the only problem. Most of the "safe" places people park cash pay interest too.

Is a high-yield savings account halal?

No. Putting money in a bank is lending it to the bank, and the bank pays you interest for that. The rate doesn't change anything: a 4.5% APY high-yield savings account is riba just like a 0.01% checking account. Some scholars let you keep money in a normal account if you have no other choice, but you have to give the interest away to charity, and it doesn't count as your sadaqah.

What you want instead is an account at an Islamic bank (or an Islamic window of a normal bank) that pays an expected profit rate. The bank invests your money in permissible assets, usually through mudaraba or wakala, and shares the profit with you.

• UK: Islamic banks like Al Rayan Bank and Gatehouse Bank offer easy-access, notice and fixed-term accounts. The FSCS protects deposits the same way it does at normal banks, up to £120,000 per person per bank.¹¹
• US: Slim pickings. University Islamic Financial, part of University Bank, offers profit-sharing deposit accounts. Most "halal" fintech apps don't hold your deposits themselves, so ask where your money goes and whether FDIC insurance covers it.

Is there a halal money market fund?

Normal money market funds (VMFXX, SPAXX, SWVXX and similar) hold Treasury bills, repos and commercial paper. All of those pay interest, so they're out.

We couldn't find a US-listed halal money market ETF in October 2026. The closest options:

1. A profit-rate savings account at an Islamic bank, for money you need within a year.
2. A short-duration sukuk fund like AMAPX, which aims to protect your capital. It still moves with interest rates and credit spreads, so don't treat it like cash.⁹
3. In the Gulf and Malaysia, Shariah-compliant money market funds invest in murabaha deposits and short-term sukuk. US and UK residents usually can't buy them.

Are Premium Bonds halal?

Most scholars say no. NS&I Premium Bonds don't pay interest to each holder. NS&I works out an "annual prize fund rate" (4.35% from September 2026) across all eligible bonds and pays that pot out as random prizes.¹² So the prize money is really the interest the Treasury would have paid anyway. Handing it out by lottery adds gambling (maysir) on top of the riba. AAOIFI's Standard 21 names prize bonds as banned, government ones included.¹

A minority of scholars allow Premium Bonds, because your money is guaranteed and they see the prize as a gift from the government. If you already hold some, the careful move is to cash them in and give any prizes you won to charity.

Where sukuk fit in a halal portfolio

Sukuk do the job bonds do in a normal portfolio. They calm things down and pay steady income. They don't grow like stocks. Here's SPSK next to a halal equity ETF since 2019:

This chart only shows price change. It leaves out SPSK's monthly payouts, so it makes SPSK look worse than its total return. For total return at NAV, use the numbers in the SPSK section above.

One simple way to split it up:

1. Emergency fund (3–6 months of costs): a profit-rate account at an Islamic bank. Keep this money out of sukuk and stocks.
2. Money you need in 1–5 years (a house deposit, school fees): sukuk ETFs, or a fixed-term Islamic deposit that ends when you need it.
3. Money you won't touch for 5+ years: halal stocks. That's where long-term growth comes from.

The closer you get to needing the money, the more of it belongs in the first two buckets. A 30-year-old saving for retirement might hold no sukuk at all. Normal portfolios near retirement often hold 20–40% in bonds, and sukuk can take that spot. This is general information, not personal advice.

The stock side is usually where people get stuck. Halal equity ETFs are pricey, and many put 40–60% of the fund in ten stocks. Amal Invest builds Shariah-certified versions of popular funds in your own brokerage account, screened to AAOIFI standards and certified by Amanah Advisors. You pay once instead of a yearly percentage. Our two portfolios cover both ends: Grow for long-term growth, and Save, built on a dividend-growth fund, for a smoother ride. You can see how Grow and Save have performed. Want some fixed income too? Hold a sukuk ETF next to them.

Sukuk risks to know

• Interest rates. Sukuk are priced against benchmark rates. When rates jumped in 2022, sukuk ETFs fell along with bond funds.
• Concentration. Saudi Arabia, the UAE, Indonesia, Malaysia and the Islamic Development Bank issue most sukuk. A "global" sukuk ETF looks more like a Gulf government debt fund than a global bond fund.
• Credit and structure. If the issuer defaults, asset-based sukuk usually leave you with an unsecured claim on the issuer, not the asset. The 2009 Dubai World and Nakheel crisis showed sukuk holders can get hurt when an issuer is in trouble.
• Currency. Most sukuk ETFs hold US-dollar sukuk, so UK and European investors take on USD/GBP or USD/EUR risk unless they buy a hedged share class.

There's more out there than stocks and sukuk. Our guide to what Muslims can invest in goes through the rest.

FAQ

Are bonds halal?

No. Conventional bonds, government bonds included, pay interest on a loan, and that's riba. AAOIFI Shariah Standard 21 bans issuing, buying and selling interest-paying bonds and names investment sukuk as the replacement.¹

Are sukuk halal?

They're designed to be, but the label alone doesn't make one halal. A compliant sukuk gives you ownership of a permissible asset or project, doesn't guarantee your money in a profit-sharing structure, and is approved by a Shariah board. AAOIFI put out its 2008 statement because a lot of early sukuk failed these tests.⁶

What is the best sukuk ETF?

In the US, SPSK, because it's the only one. In the UK, the HSBC Global Sukuk UCITS ETF (HBKU/HBKS) has the lowest fee at 0.37% and trades on the London Stock Exchange. In Europe, compare it with the iShares $ Sukuk UCITS ETF (SKUK) at 0.40%.

Is SPSK halal?

SPSK tracks the Dow Jones Sukuk Index, which only includes sukuk issued in line with Islamic finance principles.³ Most investors and scholars treat it as a halal fixed-income option. The complaints about it are the returns and the fee. See our SPSK fund page for current holdings.

Is a high-yield savings account halal?

No. The interest on a high-yield savings account is riba, whatever the rate. Use an Islamic bank account that pays an expected profit rate instead, and give away any interest you've already received.

Are Premium Bonds halal?

Most scholars say no. The prizes come from interest on the pooled money and get paid out by lottery. AAOIFI Standard 21 lists prize bonds as banned.¹

Do sukuk pay a fixed return?

Ijara sukuk pay rent that's usually fixed or tied to a benchmark, so they act a lot like a fixed-rate bond. Mudaraba and wakala sukuk pay from real profit and can't guarantee your money, though many aim for an expected profit rate.

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