Islamic Finance – Islamic Capital Market - Benefits of obtaining money through receivables securitization
The issuer will receive funds totaling $100 million as one of the advantages of using this method to raise money. These may be used as working capital or for any other shari'ah-compliant reason. Bonds will be given to the investors as proof of their eligibility or right to demand payment from the issuer. Due to the fact that it is a bond and can be freely traded in the secondary market, the Malaysian practise is not usually regarded favourably by other international investors. Many scholars believe that the trading of bonds, which are fundamentally based on debt, or a future obligation to pay investors or future receivables due to investors, contains an element of riba because a bond is considered to be money. Any exchange of currency must take place on an equitable footing and at face value. But market value serves as the foundation for bond selling in the secondary market. For the majority of academics who are not from Malaysia, selling bonds at any price above face value is equivalent to paying riba because the bonds reflect cash sums owed. The contention that these debts are produced by selling or leaseback contracts is at the heart of the justifications for this legality. According to Malaysian academics, these debts do not typically result from a loan (Qard/Hassan) contract. Unlike loans, debts that are the result of sales or leases, such as Istisna and Murabahah, can be purchased and sold for any amount because the assets that sustain these debts are the objects of sales or lease agreements.
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