Escolar Documentos
Profissional Documentos
Cultura Documentos
in Sukuk designs
Dr. Tariqullah Khan, Professor of Islamic Finance
Architectural players
Architects setting the principles, norms and guidelines (Shariah & legal scholars); Engineers - (product developers & arrangers) Plumbers - (other professionals) Influencers independent scholars, Muftees, media Investors and users
Non-existence of noise
Promise to repurchase the Sukuk assets at the initial price is not permissible
Sukuk and their Contemporary Applications open source document 2007 by Muhammad Taqi Usmani, President of the AAOIFI Shariah Council
Promise to repurchase the Ijarah Sukuk assets at the initial price is permissible
AAOIFI Sukuk Resolution 2008
Prospective Holders should note that different Shariah advisers, and Saudi courts and judicial committees, may form different opinions on identical issues and therefore prospective Holders may wish to consult their own legal and Shariah advisers to receive an opinion if they so desire.
Equity shares
Bonds
Credit risk
Equity Sukuk
Bond
Credit risk
Equity
Bond Sukuk
Sukuk Structural Risk bundled nature of credit, price and return risk
Consequence of disputes and noise between Shariah scholars
Credit risk Interest rate risk
Bond
Sukuk
Equity
Pitfall of Tawaruq
$100 Tawaruq $100 Tawaruq $100 Tawaruq $100 Tawaruq
$100 Tawaruq
Financing Scenario -3: But if we make non-genuine Murabahah like Tawaruq as the core business, this scenario prevails which is almost similar to Scenario 1, where financing gets out of the real economy.
Financing Scenario-2: If we make genuine Murabahah as the core business of banks, this scenario prevails, where financing cannot get out of the real economy. In this scenario, we can benefit from the advantages of the fractional reserve banking system but at the same time also avoiding the excessive and unhealthy credit creation by banks.
7% interest
10% interest
Financing Scenario-1: If we make lending as the core commercial activity of banks, financing gets out of the real economy and this scenario is the real possibility as lending will be primarily based on ratings and credit risk.
$100
$100
$100
Structural risks exist because as if the key architectural players are only independent and paid Shariah scholars
Structural risks cause wealth losses as well as hamper growth and depth of the Islamic capital markets
Looking ahead - Apex Islamic Finance Board is the need to avoid structural risks of industry
Thank you
tkhan@qfis.edu.qa