Introductin to sukuk

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
usufhasan@hotmail.com

Islamic Jurisprudence
Sukuk
A financial product that develop input
methods for capital resources.
It structure and engineered
Islamic financial products
bases of output
Yousuf 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 nontradability 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 assets
Shariah 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 Rule
 Money 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 Loss
Yousuf 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

Interest
Yousuf 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

Introductin to sukuk

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