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Sukuk Al Ijarah

Posted on 6th December 2010 by Camille Paldi,

Sukuk Al Ijarah is an Islamic bond where in which the issuance is backed by the buying, selling, and leasing of properties.

Example of Sukuk Ijarah Structure:  http://al-sukuk.com/Finance%20islamique/FIPROD/FIPROD_Sukuk.html

Sukuk Certificates of equal value are issued by the owner of a leased asset or a tangible asset to be leased by promise.  The certificates can also be issued by a financial intermediary acting on behalf of the owner with the intent of selling the asset and recovering its value through subscription with the result that the holders of the Sukuk certificates become owners of the assets.

Certificates of Ownership of Usufructs of Existing Assets

  1. Certificates of equal value issued by the owner of an existing asset either on her own or though a financial intermediary with the goal of leasing the asset and then receiving the rental income from the revenue of the subscription so that the usufruct of the assets passes into the ownership of the holder(s) of the certificate(s).
  2. Certificates of equal value issued by the owner of the usufruct of an existing asset (lessee) either on her own or through a financial intermediary with the goal of sub-leasing the usufruct and receiving the rental income from the revenue of the subscription so that the holder(s) of the certificates become the owners of the usufruct asset.

Certificates of Ownership of Usufructs of Described Future Assets

  1. These are certificates of equal value issued for the purpose of leasing out tangible future assets and for collecting the rental income from the subscription revenue so that the usufruct of the described future asset passes into the ownership of the holders of the certificates.

Certificates of Ownership of Services of a Specified Party

  1. These are certificates of equal value issued for the purposes of providing services through a specified provider and obtaining service charges in the form of subscription income so that the holders of the certificates become owners of these services.

Certificate of Ownership of Described Future Services

  1. These are certificates of equal value issued for the purpose of providing future services through described provider and obtaining the fee in the form of subscription income so that the holders of the certificates become owners of the services.

Key Points

  • A promise by the originator to purchase back the leased asset at par value either at the maturity date or in the event of default.
  • The rental is floating based on LIBOR Benchmark.
  • The insurance cost is borne by the Sukuk investor, but to be set off against the selling price under the promise to purchase back.
  • In most cases of Sukuk Al Ijarah, (which are asset-based), the transfer of title to the SPV/Issuer/ Trustee is based on beneficial ownership transfer not legal ownership transfer.

Information taken from materials handed out at the Amanie Islamic Finance School Workshop in Dubai, UAE on December 14-15, 2008 and www.bruneiresources.com.

LINK TO CASE STUDY:  http://www.kantakji.com/fiqh/Files/Finance/N263.pdf

Interesting Articles —

http://www.middleeastforex.com/news/articles/28/Nomura-to-Issue-$100-Million-Sukuk-Al-Ijarah.html

http://www.bruneiresources.com/pdf/sukuk.pdf


Posted on 6th December 2010 by Camille Paldi


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