What is sukuk and how does it work?
Sukuk are structured based on the specific contract of exchange of the Shariah-compliant assets. Such contracts can be made through the sale and purchase of an asset based on immediate, instamental or deferred payment, leasing of specific assets or participation in joint-venture businesses.
What is sukuk in Islamic banking?
Sukuk is about the finance provider having ownership of real assets and earning a return sourced from those assets. This contrasts with conventional bonds where the investor has a debt instrument earning the return predominately via the payment of interest (riba).
What is the purpose of sukuk?
A sukuk is a sharia-compliant bond-like instruments used in Islamic finance. Sukuk involves a direct asset ownership interest, while bonds are indirect interest-bearing debt obligations.
How is sukuk different than bonds?
Sukuk are Sharia-compliant financial certificates through which investors gain partial ownership on an issuer’s assets until the Sukuk maturity date. While Bonds are financial certificates through which investors lend money to the issuer, indicating an obligation for repayment at maturity date.
How is sukuk different from bonds?
What is the difference between sukuk and shares?
One can easily differentiate between sukuk and shares. As shares represent a general ownership for an unlimited period of time while sukuk represent ownership in specific asset or project of a company for a limited period of time.
How do sukuk work?
In any sukuk transaction, the issuance of sukuk certificates will simply raise a cash amount required by an originator. The issuance itself will not entitle the investors to a return on their investment and, therefore, must be supplemented with another Islamic financing structure.
What are the different types of sukuk structures?
Although it is possible to interpose a sukuk issuance onto any Islamic financing structure, historically, the most prevalent structures used in the sukuk space were Mudarabah, Musharakah, Murabahah and Ijarah, structures.
What does sukuk stand for?
^ “Definition of sukuk (Islamic bonds)”. ft.com/lexicon. Retrieved 11 March 2017. ^ Ercanbrack, Jonathan (2015). The Transformation of Islamic Law in Global Financial Markets. Cambridge: Cambridge University Press. p. 138.
Do we need Sharia scholars to structure a sukuk?
From transaction to transaction, to the extent that the structure used for the sukuk departs from the typical structures already well recognised in the market, the involvement of the sharia scholars is necessarily required. This can add some additional cost and an element of unpredictability to the transaction structuring process.