Why Islamic Repo Is the First Use for Tokenized Sukuk

More than USD 1.1 trillion of sukuk are outstanding worldwide. Saudi Arabia is the largest market in the GCC, which accounts for close to half of global issuance. Almost all of it is issued, held and settled the way it was two decades ago: bought at issuance, held to maturity, moved rarely, and settled over two days through a chain of custodians and correspondent banks.

This post explains what sukuk are, what tokenizing them means in practice, the use cases that follow, and why Islamic repo is the use case where tokenization helps most. It ends with the one example that has already been settled.

What Sukuk Are

A sukuk certificate gives its holder a share in an underlying asset or business activity, and a share in the income that asset produces. A bond is a loan, so the holder is owed money and receives interest. A sukuk is ownership, so the holder owns part of something real and receives the return it generates.

The structure depends on what the certificate represents:

• Ijara. The holder owns a share of a leased asset and receives a share of the rent.
• Murabaha. The certificate represents a share in a sale of goods at a marked-up price, paid in installments.
• Wakalah. An agent invests the proceeds in a portfolio of Shariah-compliant assets on the holders' behalf.
• Mudaraba and Musharaka. The holder shares in the profit and loss of a business venture.

Across all of them, the certificate is valid because it reflects genuine ownership and a genuine transfer of that ownership.

What Tokenizing a Sukuk Changes

Tokenizing a sukuk means recording the certificate and its ownership on a shared distributed ledger, so that every party reads the same record and that record updates at the moment a transfer happens. The legal instrument and the Shariah structure carry over as written. The change sits in the operational layer around them.

Three things become possible:

1. Ownership moves in minutes. A transfer is complete the moment the ledger records it, and every institution in the chain reads that entry as its own record.
2. Cash and certificates move together. If the money is also represented on the ledger, both legs of a trade settle at the same moment, so each side receives as it delivers.
3. The lifecycle runs from the record. Profit distributions, transfers and redemption execute from the same ledger that holds the ownership record, so the paying agent works from the register itself.

Two Malaysian institutions have demonstrated this. In April 2026, the sovereign fund Khazanah issued a RM100 million sukuk as a digital twin of a conventional tranche under an existing programme, carrying the same legal and Shariah structure. In August 2026, CIMB Islamic tokenized RM1.38 billion of a sukuk issuance and settled it against tokenized bank deposits inside the central bank's innovation hub, stating that the sukuk's economic and Shariah structure carry through the tokenization layer intact.

Six Uses for a Tokenized Sukuk

Issuance under an existing programme

An issuer adds a tokenized tranche to a programme it already runs. Same documentation, same Shariah opinion, same investors. The tranche proves the operational model on an instrument investors have already underwritten.

Settlement against tokenized money

The sukuk and the cash settle on the same ledger at the same moment, as proven by Oumla’s  Islamic Repo PoC in 2025. This step turns the tokenized certificate into something a treasury desk can trade instantly.

Automated profit distribution and redemption

Periodic payments and final redemption execute from the ownership record itself. The agent knows who holds what at the moment of payment because the ledger does.

Collateral for margin and liquidity

A tokenized instrument can be pledged and released within minutes. Tokenized money market funds already serve as margin collateral at exchanges because they keep earning while pledged. A tokenized sukuk can do the same job for Islamic institutions.

Cross-border settlement between Islamic institutions

Two banks in different jurisdictions settle a sukuk trade on one ledger under one set of rules, replacing a chain that runs through two custodians and a correspondent bank.

Islamic repo

A bank raises short-term liquidity against sukuk it already holds, in a Shariah-compliant structure, and gets the sukuk back at maturity. This is the use case where tokenization helps most, and it has already been demonstrated by Oumla.

How Tokenization Helps

1. Traceable ownership. The sukuk moves from one bank's ownership to another on the ledger, at a recorded moment. The genuine transfer Shariah requires exists in the record itself.
2. Enforceable promises. The buy-back and sell-back wa'ad are encoded as distinct commitments, each with its own date and price, and each executing on its own terms.
3. Atomic settlement. Sukuk and cash move at the same moment, so each bank receives as it delivers. That simultaneity addresses the counterparty risk repo exists to manage.
4. Unlocked liquidity. Islamic banks hold more cash than conventional peers because Shariah-compliant liquidity tools are scarce and slow. A sukuk that can be repo'd the same day works as a liquidity instrument.
5. Continuous Shariah audit. The sequence of transfers, the promises, the eligibility checks and the settlement sit in a single record, so the board and the regulator review the transaction itself.
6. Shared rulebook. All banks settling on one ledger set eligibility rules, approval workflows and operating hours once, in the system, and every trade after that runs on them.

This Has Already Settled in Saudi Arabia

In August 2025, the first Islamic repo on blockchain settled in Saudi Arabia. Nine trades, more than SAR 110 million, five Saudi banks, with the regulator observing. Edaa, Muqassa and Wamid participated alongside them. The collateral was sukuk, and the cash and the sukuk moved at the same time.

If your institution holds sukuk and manages liquidity under Shariah constraints, two things are worth checking: whether that sukuk can be mobilised the same day, and whether your Shariah board can verify the sequence of transfers from the record itself. We can walk you through how the Islamic repo was built and what the same infrastructure means for your treasury. Email info@oumla.com.