Islamic Finance – Islamic Capital Market - Ijarah Sukuk
Sukuk Ijarah offers a fixed revenue through the lessee's or originator's rental payments. Two mechanisms, namely the establishment of a trust over the leased asset in favour of the Sukuk holders and the incorporation of a put option or purchase undertaking by the lessee to purchase the leased asset, especially in the case of default, safeguard the financial interests of the investors. The put option's cost is frequently predetermined in advance using the principal's face value. This sum consists of the principal certificate of Sukuk, the amount of rental owing prior to the default date, and any other scheduled or agreed-upon costs that the lessee is responsible for covering. The investors' capital is effectively protected as a consequence of this. The price should be based on market value to represent the meaning of Sukuk investment, which is essentially an investment certificate, which may be why some academics find this put option objectionable. These researchers contend that any investment certificate must be devoid of any capital security. A guarantee on the principal's investment would be given if the leased asset were to be bought by the lessee in the event of default at a cost equivalent to the outstanding principal. The conditions of this type of transaction restrict the owner/purchaser of the asset from selling the asset in the open market because the owner/purchaser has been compelled to sell to the obligor at a predetermined price. This is acceptable provided that the put option's price is determined by the leased asset's market value at the moment of default. Scholars who accept this aspect of the Sukuk Ijarah, however, have contended that the put option is actually exercised on the leased asset rather than the capital invested. The put option is essentially the lessee's unilateral pledge (Wa'd) to buy the leased asset from the lessor at a predetermined price. The lessee may promise to buy the leased asset at any agreed-upon price.
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