Part II Islamic Law and Contracts in Practice, 11 Sukuk

Author(s):  
Hanif Atif ◽  
Johansen Julian ◽  
Richardson Edana

This chapter focuses on the sukuk market, which represents one of the more high-profile elements of the Islamic finance industry. Over the last two decades, the sukuk market has been a key driver behind the growth of Islamic finance globally, with the state of the sukuk market often seen as a barometer for the health of the wider Islamic finance market. However, the sukuk industry has also had its own specific hurdles to overcome. Internal scepticism, a multitude of complex structures, and legislative restrictions have all contributed to the current shape of the sukuk market. While this market may never challenge the conventional debt capital markets in terms of size or accessibility, it remains a key aspect of the Islamic finance industry generally and offers an important Shari’a-compliant resource for issuers and investors.

2018 ◽  
Vol 10 (1) ◽  
pp. 85-93
Author(s):  
Abdulbari Mashal ◽  
Amer Hajal ◽  
Om Kalthoum Majoul ◽  
Mir Riaz Ansary

Purpose This paper aims to investigate sale with the temporary exclusion of usufruct, a format debated in classical Islamic jurisprudence. More specifically, it examines the application of this sale format in the diminishing partnership arrangement used by American Finance House LARIBA to finance house purchases. It analyzes the Sharīʿah issues and assesses the risks involved. Design/methodology/approach The research is qualitative, surveying and critically analyzing classical fiqh literature and contemporary juristic resolutions, as well as LARIBA’s financing documents. Finally, it systematically surveys the associated risk factors, first qualitatively, and then by quantifying them. Findings The research concludes that sale with the temporary exclusion of usufruct is a valid contract in Islamic law. When the usufruct is priced at market rate, the financing arrangement is genuinely Islamic and brings added value. Moreover, it is very effective in addressing risks for Islamic banks, particularly in countries with legal systems not designed to accommodate Islamic finance. Originality/value This study systematically examines all aspects of a contract that has not received sufficient academic attention, that has been underutilized by the Islamic finance industry and that is more fitting for implementation than many of the contracts currently being used.


2013 ◽  
Vol 1 (3) ◽  
pp. 100 ◽  
Author(s):  
Syed Faiq Najeeb ◽  
Mirza Vejzagic

Despite initiatives and discussions in many countries to introduce Islamic capital markets, the share of non-banking assets in the global Islamic finance industry remains small. Islamic banking continues to dominate the Islamic finance portfolio with a gigantic 80.9% contribution towards the total Islamic finance assets as at year end 2011. Based on such statistical reality, one may wonder, what are the current growth and development trends of Islamic Capital Markets (ICMs)? To this end, this paper assesses the development, growth and challenges of Islamic Capital Markets in Malaysia, Indonesia, United Arab Emirates, and Brunei and critically analyses the fundamental factors that contribute towards the liquidity, volume and trends of the Islamic Capital Markets in these countries. Using Malaysia as a benchmark, this paper provides a comparative analysis on the performance of the various sectors of Islamic capital markets such as equity markets, debt markets, fund management markets, liquidity markets, etc. amongst the four sample countries. In addition, the paper examines the local authorities? initiatives? and future plans for firmly establishing Islamic Capital Markets in their jurisdictions and further recommends potential policies that could be introduced to maximize economic gains and societal welfare from Islamic Capital Markets for the Muslim population in general. Overall, the findings from the paper are expected to attract significant interest from Islamic finance stakeholders, in particular to understand how local authorities and other players could possibly be instrumental in shaping the development of Islamic Capital Markets.


Author(s):  
Eisenberg David M

This chapter studies how conventional derivatives—especially futures, options, and swaps—have been or may be based on bay’ salam, bay’ ʻurbun, and other traditional Islamic transaction structures. Bridging the gap between traditional Islamic transaction structures and conventional derivatives continues to be among the most urgent challenges facing the global Islamic finance industry, not least to provide Islamic financial institutions with a crucial tool for risk management. Salam and ʻurbun clearly illustrate the nature of the challenge to create Shari’a-compliant derivatives. Paradoxically, it is their deviation from the standard conditions for a valid sale contract that allow them to function to some extent as proxies for conventional derivatives. Among jurists, a consensus (ijma’) emerged as to the validity of salam, although special conditions were imposed not only to minimize gharar (uncertainty) and the kindred contractual defect of jahl (lack of knowledge), but also to reduce the possibility of riba (unlawful gain). There is still considerable debate among the various schools of law as to whether ʻurbun constitutes a valid sale contract under the Shari’a.


2020 ◽  
Vol 34 (4) ◽  
pp. 313-355
Author(s):  
Edana Richardson

Abstract Responsible finance ṣukūk provide market participants with a capital markets instrument through which they can fulfil the dictates of Islamic law while also participating in green, social or sustainable economic activity. However, as centres for Islamic finance (such as Malaysia and Indonesia) become prominent markets for responsible finance ṣukūk, issuances of these instruments have been noticeably slower to develop in the United Arab Emirates (UAE). This has not been due to a lack of public enthusiasm for a sustainable economy from UAE authorities. However, the plethora of government sustainability initiatives, statements and targets has resulted in somewhat of a patchwork of policies, not all of which are publicly available or centrally curated. This article will aim to map the UAE’s sustainability agenda and consider where responsible finance ṣukūk fit within this agenda. Against this backdrop, it will analyse the contractual structure of the UAE’s first issuance of responsible finance ṣukūk.


2012 ◽  
Vol 26 (3) ◽  
pp. 313-337
Author(s):  
Younes Soualhi

Abstract This article is an attempt to formulate a viable Sharīʿah framework for juristic differences in contemporary Islamic finance. While acknowledging the legitimacy of juristic differences as an inherent feature of Islamic law, such differences could jeopardize a nascent Islamic finance industry, leading to what has come to be arbitrarily termed ‘Sharīʿah risk’ in Islamic finance. Two blocks appear to represent the two disputing sides since the launch of this industry, i.e., the Middle Eastern and South East Asian markets. Thus, this article aims to bridge differences in Islamic finance by proposing a framework and set of parameters that can be applied to all Islamic banking, Islamic capital market and takāful products. Apart from the outlined framework that aims to circumvent juristic disputes, this article concludes that juristic dispute resolution in Islamic finance will not be attainable until one can appreciate the legal and regulatory differences in which Islamic finance operates worldwide.


2016 ◽  
Vol 4 (2) ◽  
pp. 1
Author(s):  
Aly Khorshid

Islamic banking and finance sector risks losing a golden opportunity to demonstrate an alternative system that could prevent a future credit crunch and share risks. With the conventional banking sector slowly coming to terms with its high-profile collapses and bailouts, the Islamic sector  has suffered  only mild aftershocks. The question  that comes to mind is: why are savers and investors not flocking to shariahcompliant banking? Could Islamic finance lack a certain degree of credibility? And if so, why? 


2020 ◽  
Author(s):  
Asmadi Mohamed Naim ◽  
Mohamad Yazid Isa ◽  
Mohd Liki Hamid

The book provides comprehensive compilation on Islamic legal documents related to Islamic financial system consists of legal statutes, frameworks, guidelines, circulars and internal compliant manual covering Islamic banking, takaful and Islamic capital markets. Brief description of those documents are laid down to assist non-legal background readers in having comprehensive view of Islamic finance legal system.Few special focuses are done to Shariah screening methodologies for stocks, Islamic fund and real estate with special review on few sukuk issuances as to familiarize reader with the principle terms and conditions (PTC) of the sukuk. Islamic finance is not just a system but it is a way to achieve the spirit of Shariah i.e. maqasid Shariah in providing prosperity to the society in blessing ways avoiding all prohibited elements as stated in Islamic law.


2021 ◽  
Vol 7 (2) ◽  
pp. 317-340
Author(s):  
Muhammad Ayub ◽  
M. Fahim Khan

The challenges facing the Islamic banking and finance industry include, inter alia, resolving the issue of ‘form over substance’, adopting value-based social and ethical finance, and reinforcing public confidence that its business and services conform to the principles of Shari’ah in both letter and spirit. These challenges can be faced only if Islamic finance is based on the money and monetary perspective of Islamic economics. An important aspect for discussion in this context is the issue of money creation. This paper is based on an analysis of the literature on conventional and Islamic economics and Islamic finance. It comprises observational and narrative research mainly because monetary policy from an Islamic perspective has not been implemented in any jurisdiction in the modern world. Its objective is thus to suggest how monetary policy might evolve from the perspective of Islamic law of contracts. It discusses an economic model in which a new theory of monetary economics could become a basis for evolving Islamic finance in its value-based perspective. It also discusses monetary economics and monetary policy from an Islamic perspective in the context of contemporary Muslim economies. The Islamic financial system must be based on the Islamic system of money, monetary economics and exchange principles. Hence, economists and policymakers may first focus on evolving monetary economics and policy from an Islamic perspective, to serve as a basis for structural reforms.


2017 ◽  
Vol 14 (1) ◽  
Author(s):  
Suhartono Suhartono

The appreciation of the reputation and achievements of the Religious Courts continued to flow from experts and credible international survey organizations. Among others, Mark Cammack[1], Daniel S. Lev[2], Markus Zimmer, Cate Summer[3], Tim Lindsey, CJ Diana Bryant, Yoshiharu Matsuura etc. Meanwhile, the survey agency, among others, The Asia Foundation[4], ACNielsen, UN Women -institute under the auspices of the United Nations-, IALDF, etc. that in essence they satisfy with the performance of the Religious Court. This condition is contradictory to the situation in their own country, even though de jure has received an additional mandate (competence) as mandated by Article 49 of Law No. 3 of 2006, but de facto skepticism and pessimism in some quarters, indirectly weaken and reduce the competence of the Religious Court. This is often done by a handful of party, unsupported by valid research data. In fact, the true increase Religious Court's competence born from the womb of reform, but already at the age of eight years of this, it still has not gained the trust and support of the maximum. Expectations of economic actors to the sharia court Religion should be coupled with efforts to strengthen the real from stakeholders to the Religious Court can maximize its role in escorting the growth of the Islamic finance industry, that will be the focus of study in this paper.[1] Guru besar Southwestern Law School, Los Angeles California USA, dalam bukunya: Islamic Law in Contemporary Indonesia; Ideas and Institutions’ (2007), ia mengatakan, Peradilan Agama merupakan kisah sukses dalam sistem hukum yang disfungsional (disfunctional legal system) di Indonesia.[2] Dia mengakui bahwa Peradilan Agama merupakan pengecualian dari persepsi publik yang kurang baik terhadap pengadilan, menurut Lev, Pengadilan Agama telah bekerja dengan baik.[3] Cate Summer dan Tim Lindsey dalam bukunya, Courting Reform: Indonesia’s Islamic Courts and Justice for the Poor, mengatakan:”.. as champion within the judicial system of justice and access to justice reform in Indonesia......”. “From this perspective, the Relegious Court can be seen as one of the most successful of Indonesia’s judicial institutions. This is in some senses, ironic, as these courts have also historically been neglected by the state...”.[4] Lihat Anonim. 2005. Citizens’ Perceptions of the Indonesian Justice Sector (Survey Report). Jakarta: The Asia Foundation. hal. 63 hasil surveynya menyatakan Peradilan Agama sebagai satu-satunya institusi penegak hukum yang memiliki performance paling baik, dibandingkan lembaga penegak hukum lainnya.


2018 ◽  
Vol 2018 (2) ◽  
pp. 65-78
Author(s):  
Oleg MOZGOVYI ◽  
◽  
Oleksii SUBOCHEV ◽  
Oksana YURKEVYCH ◽  
◽  
...  

The article identifies basic models of Islamic finance industry and provides a critical assessment (compared to conventional finance) оf mechanism of their functioning. Despite having obvious positive aspects, such as limitation of speculative or risky securitization, focusing on financing the real sector of economy and encouraging the direct interrelationship between financial and productive sectors, in our view, the mechanism of Islamic economics in some ways is at variance with a number of fundamental principles of effective economic activity. Objective factors (demographic, political, economic) cause an increase of role and influence of the industry over regional financial markets and international finance and determine the relevance of further research in this area. Today, Islamic finance comprises such commercial areas as capital markets, asset management and insurance. They represent all segments of modern financial market – commercial banking, operations with equity and venture capital, trade financing, insurance and even financial hedging. Only a small share of Muslims’ financial relations is provided in accordance with Islamic law. Under conditions of introducing the convenient, liquid and standardized financial instruments and further improvement of regulation for financial markets, redistribution of resources in favor of Islamic financial markets, as well as rapid growth of their share in international finance are expected.


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