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Financial Instrument that play a role to bring input resourse for output financial participation. It is the method to structure the capital base for a transaction or a project.
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Sukuk
Sukuk is an Arabic word and plural of a word Sakk.
It signify legal instrument, deed or Cheque.
It is an Arabic name for a financial certificate which can be taken similar to Bond.
Yousuf Ibnul Hasan
Islamic Jurisprudence
SukukA financial product that develop input
methods for capital resources.
It structure and engineered
Islamic financial products
bases of outputYousuf Ibnul Hasan
Fixed and guaranteed
Income or interest bearing bonds are not permissible in Islam.
Sukuk are securities
Meeting terms of Islamic Financial law and investment principles
which prohibits charging, paying interest & involvement of Riba.
Yousuf Ibnul Hasan
Sukuk is a Financial Assets
Act in accordance with
Islamic law
and
Classified
in accordance with their tradability and non-tradability in the secondary markets
Yousuf Ibnul Hasan
Islamic Investment Principles
IIP
IIP is the part of ‘Shariah’,
Indirectly to be an ‘Islamic Law’.
Actually it is extensive to law as it cover general body of spiritual and moral
obligations and duties in Islam
Yousuf Ibnul Hasan
A time-honored instrument for a contemporary use
In post Islamic era Sakk which are now called Sukuk were similar with
Conventional Cheque.
A document representing a contract, Conveyance of rights, obligations or financial transaction in conformity
with the Shariah. Yousuf Ibnul Hasan
Practical evidence in archives indicate Sukuk as a product
extensively used during medieval Islam for transferring
financial obligations
Originating from trade and other commercial activities.
Yousuf Ibnul Hasan
Fundamental nature of Sukuk in modern Islamic perspective lies in
concept of asset monetization And
Securitization that is achieved through the process of issuance of
Sukuk (Taskeek).
Its great potential is in transforming an asset’s future Cash Flow into
present cash flow..
Yousuf Ibnul Hasan
Sukuk may be issued on existing as well as specific assets that
may become available at a future date.
Sukuk is the key to structure capital as well cover the liquidity
requirement for permanent or temporary requirement
Yousuf Ibnul Hasan
The need for tangible assetsShariah Rule
Financing should only be raised for purpose specific and identifiable which must have the Economical and social viability.
Transaction under indebtedness are prohibited as a result conventional bonds or debenture are not permitted.
Sukuk returns and cash flows are linked to transaction workout Net Profit of transaction without any guarantee of return.
Yousuf Ibnul Hasan
User of funds need to utilize financing along with contributing its equity in
transaction.
Contribution of Equity is the share of risk that user confirm in the transaction .
Sukuk funds are Equity of Sukuk owners that form into finance or funds for venture
Shariah accept with risk and return guideline of Islam.
Yousuf Ibnul Hasan
Problem with interest or ‘Riba’
Bad Earning
Shariah RuleMoney is considers as measuring tool for
value.
Money is not a commodity.
Money cannot be bought and sold in similar quality.
Money to remain in circulation and cannot to be stagnant or in holding
Yousuf Ibnul Hasan
Money must have support of equal value with authentication.
Money issuance on goodwill is an artificial value and such issuance is just a paper
printing.
Money requires to be utilized to receive income or anything that has the type of
money alone. Money in exchange of money in similar quality is Interest a price
of Money which is ‘Riba’.
Yousuf Ibnul Hasan
Implication for Islamic financial institution is trading and financing, receivables for
anything other than equality.
Conventional loan, lending, borrowing or debt base plastic currency are not
permissible.
Yousuf Ibnul Hasan
Problem of uncertainty ‘Garrar’
Ambiguity in contractual terms or uncertainty in existence of an original asset consider as
unoriginal.
Shariah add in the concept of ‘Public benefit’, that, overwhelmingly in the public good may
yet be transacted
Hedging or mitigation of avoidable business risks, may fall into this category of Garrar but
there is still much discussion yet to come.
Yousuf Ibnul Hasan
(8) P- Formula
Financing is only be made available with clear understanding
of
Person, Purpose, Product, Project, Period, Performance, Process
=
Profit
And acceptance of LossYousuf Ibnul Hasan
Declaration of Results
Financing is made available on 8 P formula
Financing to be in clear confirmation:
Term and condition to pre-agreed
Duties and Responsibilities to define
Decision to be witness by active witnesses
Arbitration to be integral part of agreement
Agreement to be made by third person.
Monitor to be external body.
All matters to be in writing
Yousuf Ibnul Hasan
Sukuk for Financing
Sukuk is the source for structuring Capital
Sukuk is the source of financing
Sukuk is specific and in general.
Sukuk must be in clear period and validity.
Sukuk return are declared on maturity Sukuk k is encouragement of saving conduct
Sukuk is a trading instrument without excess to the face value
Yousuf Ibnul Hasan
Controversy
Sukuk are widely regarded as controversial due to
their visible purpose of evading limits on Riba
Traditional scholars do not believe that this is effective, referring to the fact that Sukuk
requires payment for Time Value of Money
This consider as the basic application of
InterestYousuf Ibnul Hasan
Present Sukuk offer fixed and guaranteed rate of return on investments, similar to
interest and it is risks free of particular venture for which Sukuk were issued.
In reality banks invest in assets and return from investment is spread over the period. This flow
of income is "fixed" and Rate is pre declare without utilization of investment amount
which given to investors.
Yousuf Ibnul Hasan
There is an asset in the background.
There is more security for the investor.
This security makes Sukuk increasingly appealing to global investors
including Muslims and non-Muslims.
The soul of the Sukuk is not what is been practice and the return is simply
an Interest which deviate the principal of participation.
Yousuf Ibnul Hasan
