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    Lecture About Sukuk

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    Fawad Ahmed Arain
    Sukuk are asset-backed certificates that represent ownership shares in the underlying assets. They are structured using an Islamic financial structure like mudarabah, murabaha, musharaka, istisna, salam or ijarah. Unlike conventional bonds which are debt instruments, sukuk holders have ownership in the underlying assets and are entitled to share in the revenues and proceeds from the assets. Sukuks are usually issued through a special purpose vehicle and provide short or long term returns to holders based on the performance of the underlying assets.

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    Lecture About Sukuk

    Uploaded by

    Fawad Ahmed Arain
    97 views11 pages
    Sukuk are asset-backed certificates that represent ownership shares in the underlying assets. They are structured using an Islamic financial structure like mudarabah, murabaha, musharaka, istisna, salam or ijarah. Unlike conventional bonds which are debt instruments, sukuk holders have ownership in the underlying assets and are entitled to share in the revenues and proceeds from the assets. Sukuks are usually issued through a special purpose vehicle and provide short or long term returns to holders based on the performance of the underlying assets.

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    a complete lecture abot sukuk

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    Lecture about sukuk

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    Sukuk are asset-backed certificates that represent ownership shares in the underlying assets. They are structured using an Islamic financial structure like mudarabah, murabaha, musharaka, istisna, salam or ijarah. Unlike conventional bonds which are debt instruments, sukuk holders have ownership in the underlying assets and are entitled to share in the revenues and proceeds from the assets. Sukuks are usually issued through a special purpose vehicle and provide short or long term returns to holders based on the performance of the underlying assets.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    97 views11 pages

    Lecture About Sukuk

    Uploaded by

    Fawad Ahmed Arain
    Sukuk are asset-backed certificates that represent ownership shares in the underlying assets. They are structured using an Islamic financial structure like mudarabah, murabaha, musharaka, istisna, salam or ijarah. Unlike conventional bonds which are debt instruments, sukuk holders have ownership in the underlying assets and are entitled to share in the revenues and proceeds from the assets. Sukuks are usually issued through a special purpose vehicle and provide short or long term returns to holders based on the performance of the underlying assets.

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    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 11

    Sukuk Bonds

    Basics of Sukuk
    Sukuk is popularly known as an Islamic or Sharia
    compliant Bond whilst in actual fact, it is an asset-
    backed trust certificate.
    In its simplest form Sukuk is a certificate evidencing
    ownership of an asset.
    The Sukuk structures relay on the creation of a Special
    Purpose Vehicle (SPV).
    SPV would issue Sukuk certificates which represents the
    ownership of an asset, entitlement (right/claim) to a debt or
    to rental incomes or even accumulation (collect) of returns
    from a Sukuk.
    The return provided to Sukuk holders therefore come in the
    form of profit from a sale, rental or a combination of both.
    Sukuk could be based on Mudaraba, Musharaka, Murabaha,
    Salam, Istishna, Ijara or hybrid of all these.
    Difference between conventional
    bond and Sukuk
    In its simplest form, a bond is a contractual debt
    obligation whereby the issuer is contractually
    obliged to pay to bondholders, on certain specified
    dates, interest and principal.
    In comparison, under Sukuk structure the Sukuk
    holders each hold an undivided beneficial
    ownership in the underlying assets. Consequently,
    Sukuk holders are entitled to share in the revenues
    generated by the Sukuk assets as well as being
    entitled to share in the proceeds of the realization of
    the Sukuk assets.
    Sukuk in detail
    An undivided proportionate ownership interest in an
    asset
    The corresponding right to the Islamically
    acceptable income streams generated by the asset.
    These current income streams are established and
    translated into tradable securities.
    Issuer creates a trust (arrangement whereby a person
    or group manages property on others behalf) over
    the leased or assets.
    Trustee issues Sukuk to the Primary Subscribers (the
    beneficiaries under the trust) in the Primary Market
    Sukuk in detail
    Sukuk Holders have pro-rata (proportionally)
    undivided beneficial ownership of the leased assets
    held in trust -As beneficial owners the Sukuk-
    holders are entitled to the income streams from the
    leased assets.
    The Primary Subscribers can resell the Sukuk in the
    Secondary Market
    The Secondary Buyer will be the new pro-rata
    beneficial owner of the leased assets held in the trust
    Sukuk in detail
    Sukuks are usually issued through special purpose vehicle
    (SPV; is a legal entity created to fulfil narrow, specific or
    temporary objectives).
    In Pakistan a Limited Liability Company has acted as the
    issuer and is registered with and regulated by SECP
    Short and long term 5 10 Years Tenure
    There were record number of Sukuk Issues in year 2007
    Worldwide with a Total volume of US$32.65 Billion
    Typical International Sukuk Mechanism
    A company within a corporate group is said to be bankruptcy remote ,when the insolvency
    of that company does not affect any other company in the group
    Lessee person holding a property by lease
    Sukuk Structures
    Sukuk Structuring may based on following modes
    Mudarabah (Trust Financing/Trust Investment)
    Murabahah (Sale and Purchase)
    Musharaka (Partnership, Project Finance
    Participation)
    Istishna (Purchase by Order or to Manufacture)
    Salam (Upfront Payment Sale)
    Ijarah (Operating Lease Concept)

    Sukuk Structure
    Sukuk Structuring may based on following modes
    Mudarabah (Trust Financing/Trust Investment)
    Mudarabah is a special kind of partnership where one
    partner providers the capital (rabb-ul-maal) to the other
    (mudarib) for investment in a commercial enterprise.
    Murabahah (Sale and Purchase)
    An Islamic financing structure, where an intermediary
    buys a property with free and clear title to it. The
    intermediary and prospective buyer then agree upon a
    sale price (including an agreed upon profit for the
    intermediary) that can be made through a series of
    instalments, or as a lump sum payment.
    Sukuk Structure
    Musharaka (Partnership, Project Finance Participation)
    A joint enterprise or partnership structure with profit/loss sharing
    implications that is used in Islamic finance instead of interest-
    bearing loans. Musharakah allows each party involved in a
    business to share in the profits and risks. Instead of charging
    interest as a creditor, the financier will achieve a return in the form
    of a portion of the actual profits earned, according to a
    predetermined ratio. However, unlike a traditional creditor, the
    financier will also share in any losses.
    Istishna (Purchase by Order or to Manufacture)
    Istishna is a Sharia mode of financing widely used by Islamic
    banks and financial institutions to finance the construction of
    buildings, residential towers, villas and related products, and
    manufacturing of aircrafts, ships, machines and equipment, etc.
    Sukuk Structure
    Salam (Upfront Payment Sale)
    It is an advance payment commodity sales contract where
    the delivery of the commodity is deferred. When a bank
    signs to purchase a commodity on salam and pays out the
    price, its receivable is the commodity due at a specified
    future date that is stipulated in the contract.
    Ijarah (Operating Lease Concept)
    In an ijarah contract the bank first owns an asset which it
    leases to its customer. Or the bank gets a tangible asset
    on lease from a third party and subleases it to the
    customer

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