A. What is Sukuk?
Sukuk in general can be understood as a Shariah compliant ‘bond’. In its simplest form Sukuk represents ownership of an asset or its usufruct. The claim embodied in Sukuk is not basically a claim to cash flow but an ownership claim. This also differentiates Sukuk from conventional bonds as the former proceed over interest bearing securities, whereas Sukuk are basically investment certificates involving of ownership claims in a pool of assets.
B. Type of Sukuk
1) Asset Based Sukuk
Methods of financing in which investors look to the cash flow from an asset or a pool of assets for a return on, and the return of their investment. Asset-based Sukuk reproduces a conventional unsecured bond,but uses an asset in the contract to fullfill …show more content…
Differences of asset-based and asset-backed Sukuk
SUKUK ASSET-BACKED ASSET-BASED
ISSUER SPV COMPANY
PROCESS SECURITIZATION OF TANGIBLE ASSETS SECURITIZATION OF RECEIVABLES
CHARACTERIZATION EQUITY DEBT
SOURCE OF PAYMENT THE REVENUES GENERATED BY THE UNDERLYING ASSET THE ORIGINATOR/OBLIGOR'S CASH FLOWS
SUKUK OWNERSHIP LEGAL OWNERSHIP WITH RIGHT TO DISPOSE OF UNDERLYING ASSETS BENEFICIAL OWNERSHIP WITH NO RIGHT TO DISPOSE OF UNDERLYING ASSETS
SHARIA NOMINTION CONSIDERED SHARI'A-COMPLIANT THIS STRUCTURE INVOLVES BOTH BA'I AL-DAYN AND BA'I AL-INAH. HENCE, IT IS NOT COMPATIBLE WITH SHARI'A E. Sukuk Default
Firstly, we must know what is the real meaning of Sukuk default. Is it truly a default? As showed in a previous research, Sukuk if well understood means certificates proving ownership of underlying assets that back up the issuance of such certificates which are for all intent and purpose issued to appear that a certain sum of money has been invested and passed over to the issuer/manager. True Sukuks must consult true right of ownership to Sukuk holders in the manner recognized by the Shariah, the same to be made available to them as true owners of the underlying assets that back up the Sukuk which initially means the money capital passed over to the issuer as part of the investment. In the situation of the Sukuks however, there will be no default if non-payment of profit is not caused by any negligence or illegal act on the part of the issuer/manager as profit is only outstanding if there has been actual profit recognized by the investment. In order for Sukuk to be binding from Shariah perspective, the issuance must be in the method of asset-backed that should advise true right of ownership to the Sukuk holders of all the underlying assets that backed up the
Sukuk in general can be understood as a Shariah compliant ‘bond’. In its simplest form Sukuk represents ownership of an asset or its usufruct. The claim embodied in Sukuk is not basically a claim to cash flow but an ownership claim. This also differentiates Sukuk from conventional bonds as the former proceed over interest bearing securities, whereas Sukuk are basically investment certificates involving of ownership claims in a pool of assets.
B. Type of Sukuk
1) Asset Based Sukuk
Methods of financing in which investors look to the cash flow from an asset or a pool of assets for a return on, and the return of their investment. Asset-based Sukuk reproduces a conventional unsecured bond,but uses an asset in the contract to fullfill …show more content…
Differences of asset-based and asset-backed Sukuk
SUKUK ASSET-BACKED ASSET-BASED
ISSUER SPV COMPANY
PROCESS SECURITIZATION OF TANGIBLE ASSETS SECURITIZATION OF RECEIVABLES
CHARACTERIZATION EQUITY DEBT
SOURCE OF PAYMENT THE REVENUES GENERATED BY THE UNDERLYING ASSET THE ORIGINATOR/OBLIGOR'S CASH FLOWS
SUKUK OWNERSHIP LEGAL OWNERSHIP WITH RIGHT TO DISPOSE OF UNDERLYING ASSETS BENEFICIAL OWNERSHIP WITH NO RIGHT TO DISPOSE OF UNDERLYING ASSETS
SHARIA NOMINTION CONSIDERED SHARI'A-COMPLIANT THIS STRUCTURE INVOLVES BOTH BA'I AL-DAYN AND BA'I AL-INAH. HENCE, IT IS NOT COMPATIBLE WITH SHARI'A E. Sukuk Default
Firstly, we must know what is the real meaning of Sukuk default. Is it truly a default? As showed in a previous research, Sukuk if well understood means certificates proving ownership of underlying assets that back up the issuance of such certificates which are for all intent and purpose issued to appear that a certain sum of money has been invested and passed over to the issuer/manager. True Sukuks must consult true right of ownership to Sukuk holders in the manner recognized by the Shariah, the same to be made available to them as true owners of the underlying assets that back up the Sukuk which initially means the money capital passed over to the issuer as part of the investment. In the situation of the Sukuks however, there will be no default if non-payment of profit is not caused by any negligence or illegal act on the part of the issuer/manager as profit is only outstanding if there has been actual profit recognized by the investment. In order for Sukuk to be binding from Shariah perspective, the issuance must be in the method of asset-backed that should advise true right of ownership to the Sukuk holders of all the underlying assets that backed up the