Islamic Bond Rating Methodologies Handle Complexities – S&P

The provisions of Islamic debt instruments may add levels of complexity to ratings analysis, but longstanding methodologies and rating scales are sufficiently broad so far to incorporate the varied features of Islamic debt financing, according to a report by Standard & Poor’s. ‘Islamic financing largely centers on asset-backed approaches and sometimes involves a degree of risk-sharing more commonly borne by equity investors,’ said credit analyst Kristel Richard. ‘In practice, however, as illustrated in the ‘sukuk’ (Islamic bonds), binding guarantees and other contractual obligations can place transactions firmly in the debt category.’


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