What is sukuk Ijara?
» Islamic Mode of Investment: GOP Ijara Sukuk are based on the guidelines of Shariah and approved by SBP Shariah Board. > Guaranteed Repayment: The repayment of face value at maturity and periodic rental payments are guaranteed by the Government of Pakistan.
Is Ijarah a type of sukuk?
A form of sukuk derived from the ijara lease financing structure. SPV finances the purchase of these assets with the proceeds of a sukuk issuance. SPV holds the assets in trust for the sukuk holders who each own a proportionate interest in the assets in accordance with the value of their investment.
What is sukuk Al Musharaka?
A form of sukuk derived from the musharaka joint venture or partnership structure. In a sukuk al-musharaka transaction: The two partners in the joint venture/partnership are: the entity seeking financing (originator) that contributes the assets or funds; and.
How does sukuk Ijarah work?
The Sukuk Issuer with the funds raised from the Sukuk holders will purchase an asset and then lease it back under an Ijarah contract. The rental payments will then be paid back to the Sukuk holders at set intervals. If the lessee defaults on payments or delays payments, the lessor cannot charge compound interest.
What is the meaning of Ijarah?
An ijarah refers to− (a) a lease contract that transfers the ownership of a usufruct of an asset to another person for a specified period in exchange for a specified consideration; or (b) a contract for hiring of services of a person for a specified period in exchange for a specified consideration.
What is sukuk and how does it work?
Unlike a conventional bond (secured or unsecured), which represents the debt obligation of the issuer, a sukuk technically represents an interest in an underlying funding arrangement structured according to sharia, entitling the holder to a proportionate share of the returns generated by such arrangement and, at a …
What is Salam sukuk?
Also known as salam sukuk or bai salam sukuk. Islamic finance instruments ( sukuk) based on an underlying forward financing transaction where the financial institution pays in advance for buying specified assets, which the seller will supply on a pre-agreed date.
What is originator in sukuk?
The originator—a business firm requiring capital—creates a special purpose vehicle (SPV), an independent entity and structures. The SPV protects the sukuk assets from creditors if the originator has financial troubles.
What is Al ijarah Thumma Al Bay?
As an alternative, Islamic jurists have introduced an Islamic version of hire purchase known as al-ijarah thumma al-bay’ (AITAB) (leasing ending with a sale). This means that AITAB is a leasing contract with an option for the lessee to buy the asset.
What is ijarah and its rulings in Islam?
It means ‘To employ the services of a person on wages’ e.g. “A” hires a porter at the airport to carry his luggage. Another type of Ijarah relates to paying rent for use of an asset or property defined as “LAND” in Islamic Economics.
What is sukuk explain the structure of sukuk?
What are Sukuk? To structure sukuk, the entity seeking to raise finance (“originator”), will typically incorporate a special purpose vehicle (SPV), and transfer title to the assets it intends to finance through sukuk. The SPV will then issue sukuk and use the funds raised to pay the originator for the assets.
What is the advantage of sukuk?
Sukuk can play an important part in the development of an Islamic market and banking system. The main advantage of sukuk is to comply with Sharia while boosting the standard of living in Islamic society and developing these societies’ economies.
Which is an example of a Sukuk Al Ijara?
These characteristics make ijara relatively straightforward to adapt for use in the underlying structure for a sukuk issuance. Set out below is an example of a sukuk al-ijara structure, based upon a sale and leaseback approach. Issuer SPV issues sukuk, which represent an undivided ownership interest in an underlying asset or transaction.
What does the term Ijarah mean in Islamic banking?
Ijarah is an Arabic word and it means “to give something on rent”. Under the concept of Ijarah in Islamic banking, a customer can use an asset or equipment, which is owned by an Islamic bank, for a fixed period against a fixed price.
Why is the sukuk structure so popular in Islam?
The popularity of this structure can be attributed to a number of different factors; some commentators have described it as the classical sukuk structure from which all other sukuk structures have developed, whilst others highlight its simplicity and its favour with Shari’a scholars as the key contributing factors.
When do you pay rent on an ijara sukuk?
In Ijara Sukuk the right of using the profits of the assets or a series of assets is transferred from the owner to another party in exchange for the payment of the rent. The tenure of Ijara contract is definite and the rent could be paid at the beginning or end of the period or at monthly, quarterly, or annual maturity dates.