Sukuk Variations

Sukuk can be structured based on different principles to cater for specific funding requirements. Common Islamic structures are Ijarah (leasing), Musharakah (profit and loss sharing), Murabaha (cost-plus sale) and Istisna (purchase order).


Ijarah Sukuk


A Sukuk al Ijarah may be issued for the following purposes:


  1. -To securitise ownership of a leased asset.

  2. -To securitise ownership of the usufruct of an asset.

  3. -To securitise ownership of the right to receive benefits from services.


It is important to note that an Ijarah Sukuk must represent the note holder’s proportionate ownership of the leased asset. The Sukuk note holder must assume the rights and obligations proper to a lessor to the extent of his or her ownership. As the owner, the Sukuk note holder has the right to receive rent proportionate to their ownership in the asset. Generally, the Ijarah Sukuk is designed to represent real ownership of leased assets.



Musharakah Sukuk


Used to create new projects, develop existing projects and finance business activity on the basis of a partnership.


Murabaha Sukuk


Murabaha Sukuk are sale based thereby Sukuk investors provide issuer with funding to purchase assets. Once the asset is purchased from the supplier it is sold to the issuer for a deferred price. Profit earned is distributed proportionately among the investors.


Istisna Sukuk


Istisna Sukuk are a useful investment tool for a variety of short, medium and long-term financings. For the issuance of an Istisna Sukuk an SPV is created which constructs infrastructure such as a highway (as a way of example).


The SPV then pays the cost of construction with the income generated from the sale of certificates to investors. After executing the Istisna a promise is obtained from the ultimate beneficiary of the deliverable to buy it from the SPV on the date that it is due.


Istisna Sukuk gradually transform from a pure debt to a manufactured item, so once the item is substantially created, where the timing depends on the asset and the opinion of the Shari'ah board, the certificates are tradable.


Important Note


Depending on your particular funding and project requirement we can help facilitate the appropriate Sukuk structure. One of the challenges for corporates is the tax, legal and accounting implications arising from the Shari’ah structure which may give rise to additional complexities. Depending on your project there are ways to mitigate some if not most of these challenges. We would welcome you to contact us to have a preliminary analysis of your particular situation to assess the overall viability of a Sukuk issuance.

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