SUKUK BACKED BY MIXED ASSET

SUKUK BACKED BY MIXED ASSET


Sukuk literally means “pieces of paper” or “documents that acknowledge something.” In a commercial sense it refers to instruments used in Islamic finance to allow one party to raise capital or funds in the capital market with the issuance of sukuk papers that list the rights and obligations of all parties involved in a transaction. Even though sukuk are sometimes referred to as Islamic bonds, they are not bonds in the conventional sense as holders of the former are not supposed to expect a fixed rate of returns from their purchase of these securities, as is the case with conventional bond holders. In the case of sukuk, what is important is that holders of the certificates must own the underlying assets to justify returns which are not fixed but are tied to actual returns/incomes generated by the assets owned. Hence, in the case of sukuk musharakah, for example, investors are sold portions of assets to be used in business. Returns to holders are in fact income or profit earned from the use of the assets in a manner specified in the sukuk contracts.

ISLAMIC BANKS AND HOUSES UNDER CONSTRUCTION

ISLAMIC BANKS AND THE SALE OF HOUSES UNDER CONSTRUCTION: WHERE IS THE FAULT?

Issues have been recently raised about the predicament faced by consumers who have to suffer due to houses they purchased using Islamic banking facilities provided by Islamic banks in Malaysia. According to one report by Islamic Consumer Association of Malaysia (PPIM) complaints received by the association from consumers about house financing   in the past couples of years run into thousands mostly related to non-delivery of the purchased houses due to abandoned housing projects. Many parties have voiced their displeasure at the way the relevant financing is done and called for an immediate review by competent Shariah authority to address injustice to the consumers. What is more damaging, it has been said, the good name of Islam has been compromised by such a banking practice resorted to by the so-called Islamic banks.

STANDARDIZATION OF SHARIAH OPINIONS

STANDARDISATION OF SHARIAH OPINIONS/LAW IN ISLAMIC FINANCE: WHAT ARE THE ISSUES?

We often hear people involved in Islamic finance talk (in seminars and conferences) about the need to standardize shariah laws/opinions related to the practice as they claim that without such a move the sector cannot grow. They say that the impediment to the so called growth lies with the conflicting views coming from jurists of Islamic law. But the same persons when confronted with facts about the conflicting and multiplicity of the legal systems of the world and the various judicial decisions made in various jurisdictions that are also appealable at various stages of trials in civil or conventional courts, they don’t dare to say even a word about it.

CREDIT RISK IN ISLAMIC DEPOSIT

CREDIT RISK IN ISLAMIC DEPOSIT

Islamic financial institutions mostly Islamic banks take in deposit in various forms, and employ such deposits in ways they deem fit as part of their so called Islamic banking business. In some jurisdictions the term Wadi’ah is normally used to refer to such deposits for convenience sake and for a purpose seemingly to impress upon the fact it is more of safekeeping arrangement undertaken by depositors with the banks concerned, as the term wadiah in its original sense connotes safe-keeping contract between owners of assets and safe-keepers or trustees-custodians.

But then when it come to banking business as commonly understood, such concept of custodianship is a misplaced term in the real application since in most cases the banks that accept the fund would as a matter of practical application use or employ the fund for their business operation. On this score alone it may be safely said that the use of such term as wadiah in the above context is not accurate to describe truthfully what actually happened in the context of the banking practice as described.