1.0 INTRODUCTION 1.1 Background Study Islamic Banking and Finance is a rapidly growing sector, expanding and strengthening every year. According to Tahmoures (2013), there are over 300 Islamic banks and financial organizations successfully running their businesses from Dubai, Los Angeles, London, Karachi, Jakarta, Cairo, Riyadh and many other cities around the world. The Financial Times estimates that the overall value of the sector exceeds one trillion dollars (Christophe, Rima, Laurent, Financial Times Special Report, 2010). Most of the expansion was provided by sukuk issuance. According to Nazri (2012) in his workshop presentation on Islamic Banking Operations and Regulatory Framework in Sri Lanka, sukuk are defined as certificates representing the holder's proportionate ownership in an undivided part of the underlying asset, where the holder assumes all rights and obligations in such assets. Commonly, sukuk is known as “Islamic bonds,” but it is the correct translation of the Arabic word sukukis, “Islamic investment certificates” (Tahmoures, 2013). The term “Islamic bond” is emphasized as the only difference between sukuk and conventional bond is that regulation consistent with the Islamic principle of financial trade applies to sukuk (Arif and Meysam, 2012). Conventional bond is a debt obligation issued by a company or government in order to obtain financial resources (Zhamal, 2010). The issuer is obliged to return to the bondholder the principal amount plus the periodic payment of interest or coupons, upon maturity. These conventional bonds are prohibited by Shariah due to the interest-bearing loan transaction (Nazri, 2012). Unlike conventional bonds, sukuk are issued according to the Shariah principle (Fadma and Rachid, 2013). Despite the differences between sukuk and conventional bonds, Balkish, Azwan, and Rabiatul (2012) stated that both financial instruments have a fixed-term maturity and produce profits. (coupon) and negotiable at the normal yield price. However, sukuk must be related and linked to a specific asset, service or project for a specific period of time. 1.2 Problem Statement According to Dodik (nd), there are only 20 results in total from searching for sukuk on Proquest. Today, given the growing popularity of Islamic finance and banking products around the world, especially sukuk issuance, numerous researches have been attempted to investigate the differences, application and performance related to sukuk. In the past research conducted by Fadma and Rachid (2013), they only evaluated the performance of the sukuk portfolio compared to the conventional bond portfolio, in the context of the Malaysian market. In their study, they are trying to find the correlation between the yield of sukuk portfolio and that of bonds.