Islamic Finance – Islamic Capital Market - Islamic Sukuks' characteristics, categories, and method3/7/2023 Islamic Finance – Islamic Capital Market - Islamic Sukuks' characteristics, categories, and method
The structure of Islamic bonds, which are essentially distinct from Sukuks, was covered in the preceding chapter. Sukuks are monetary-denominated participation certificates of equal unit value given to investors, in contrast to an Islamic bond, which is essentially a debt certificate or a "IOU". Sukuks were created through securitization, just like Islamic bonds. A Sukuk's subject matter of securitization is neither an obligation/debt nor a payment, in contrast to Islamic bonds. When tangible assets, usufruct rights, or an interest in a project are combined into securities that represent proportionate ownership, the procedure is referred to as a sukuk. Receivables or financial assets are not involved in a Sukuk transaction. Each holder of a sukuk has an unequal beneficial stake in the underlying assets. Consequently, in the case of Sukuk Mudarabah and Sukuk Musharakah, holders of Sukuk are qualified to receive a portion of the income produced by the pertinent assets. Regarding Sukuk Ijarah, the lease rental payments made by the lessor/obligor to the issuer/SPV are what produce the revenues, which are then proportionately distributed to Sukuk Ijarah investors. It's critical to realise that Sukuks, unlike bonds, are not "IOU" or loan certificates. Sukuks are usually certificates that show an investment in an asset or a project, typically an asset or a project that generates income. Investor returns are neither fixed nor guaranteed; instead, they depend on how well the fundamental asset performs. Prior to the creation of Sukuk Ijarah, the Malaysian market in particular had a difficult time issuing Islamic bonds or notes because the trading of these securities was founded on the idea of selling debt. This is so that Riba transactions are avoided. These Islamic bonds are basically based on receivables securitization, and any trading of these securities must be based on par value. The majority of academics believe that receivables reflect financial assets. In order to prevent the Riba element, which calls for an equal quantity in the exchange of money, the trading of those securities must be based on face value.
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