Regional Islamic capital market for fixed income securities has been growing steadily and noticeably as Sukuk has been emerging as an alternative and important instrument to conventional debt instrument in the fixed income market. Although the country has largest muslim population, Kuwait's fixed income capital market is still dominated by conventional debt instruments. Further, the central bank of Kuwait has been the major issuer of the conventional bond and not an issuer of Sukuk. The small

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... mber of sukuk issues in Kuwait compared to bonds is due to lack of clear law and regulation, shortage of expertise in structuring sukuk, and absence of government issued sukuk. Among the sukuk issued in Kuwait, only one sukuk has defaulted and has gone through restructuring during the period of global financial crisis when many financial institutions have failed around the world. This should be taken positively as a prospect of sukuk as an alternative to bond as viable fixed income security. We believe that the role of central bank is key to the prospect of flourishing Islamic financial instruments such as sukuk in Kuwait as well as in the global fixed income markets. The main objective of this paper is to analyze the following questions: 1. What is the status of Sukuk in the Kuwait market relative to conventional bonds?