Islamic Financial

Products and Processes

Ameenullah Sheikh
ameenullah.shaikh@iqra.edu.pk

Sukuk VENTURE

Financing

Sukuk-Introduction
SukukistheArabicword and
pluralofthewordSakk whichmeanscerticate.
Sukukare the certicates of
equalvaluerepresentingundividedshareofowners
hipin the assets and issued by the one who require
nancing in huge.
In the Sukuk period the Risks and Returns
associated with such Assets belong to Sukuk
holders which makes returns on Sukuk permissible
for the holders.

Sukuk-Introduction
Trade of such Sukuk is permissible, because it
will be equivalent to the sale/ purchase of
holders proportionate share in the assets.
However, trading of Murabahah and Salam
Sukuk is not permissible.

Issuance of
Sukuk

ABC
Ltd.
(Corporate)

ABC Ltd. wishes to purchase a new asset and

plan to raise nance through issuance of
Islamic Sukuk.

Supplier

Supplier of the Asset is

identied and negotiations
is nalized by ABC Ltd.
ABC
Ltd.

Supplier

ABC

Issuer
SPV
(LLC
100%
owned
ABC Ltd.)

Ltd.

SPV is created by ABC Ltd. as a limited

liability Company.

SPV issues certicates and receives proceeds

which are used to purchase asset from the
supplier
Supplier

Issuer
SPV
(LLC
100%
owned
ABC Ltd.)

Payment made to
Supplier
Title is
transferred to
SPV

ABC
Ltd.

Investors

SPV holds Asset as

Trustee and leases the
plant to ABC Ltd. as per
rules of Ijarah

Issuer
SPV
ABC
Ltd.

SPV
leases
Plant to
ABC Ltd.
on Ijarah

SPV
holds
Plant/
Asset as
Trustee

Investor

ABC Ltd.
(Lessee)

Issuer
SPV

Investors

Semi-annual
Periodic Lease
coupon distribution
Rentals
amounts
ABC Ltd. (Lessee) pays periodic
rentals to SPV
amounts matching the coupon & tenor of the
Sukuk

Exercises
the
purchase
undertaking.
Asset
transferred to ABC Ltd.

ABC Ltd.
(Lessee)
Pays the price
at dissolution

Issuer
SPV

Investors

Redeems the
Trust
Certicates at
dissolution

ABC Ltd (Lessee) gives the SPV an irrevocable purchase

undertaking to purchase the Asset at maturity.
Asset is transferred back on maturity, upon payment of the
Price to the SPV / Sukuk Holders.

Rs.100,000

SUKUK
Pakistan Cotton Trading Ltd.
Subscription Amount
Equity Participation

Rs.100,000,000
20:80

Balancing , Modernization & Replacement

Purpose
Issued For

Ghulam Mustafa

Issued 1st June 2011 to 31st December 2012

Non- Transferable, Non-Endorsable, Non-Cashable, Non Collateralize

Rs.100,000

Conventional Bonds
Bonds are considered as an important part of
overall nancial system.

1.

2.

Dealing in Bonds is not permissible according

to Islam because of two aspects.
Firstly, they represent a portion of Debt
payable by the issuer. Earning any kind of
prot on debt falls under the category of
RIBA.
Islam prohibits trading of debts as it involves
Gharar.

SUKUK

VS

BONDS

Sukuks
Represents the direct
pro rata ownership of
the holders in the
assets of the pool.

Conventional Bond
Representsa loan
repayable to the holder
in any case.

Sukuk
holder
generally earn return
from
income
generated through the
asset.

Earn Interest on loan

THANK YOU