Difference between revisions of "Islamic Finance sukuk, Shariah by Lovells"

Latest revision as of 04:56, 10 November 2017

Top 20 FREQUENT WORDS

sukuk 75 shariah 64 islamic 48 assets 45 securitisation 42 financial 39 certificates 33 qatar 29 investors 28 asset 27 institution 26 payments 26 lease 25 financing 23 structure 22 spv 21 purchase 19 cash 18 holders 18 price 18

DOCUMENT KEY POINTS

• owen lovells dot com new york robert ripin email robert
• introduction if you would like further information on islamic finance please contact any of the following or the

• the development of the sukuk and shariah securitisation growth of this market has not only been fuelled by market discussing suitable shariah compatible the desire of corporates to raise shariah compliant securitisation structures
• over some years a variety of financial institutions begun to issue shariah compliant securities to attract have developed sophisticated methods to advance middle eastern investors

• when a new issue arises on which the found by the shariah committee of one islamic position of the shariah is unknown it may be financial institution to be permitted but may be necessary to seek a legal opinion fatwa from a considered prohibited by the shariah committee of religious scholar mufti
• shariah islam is a system of belief that encompasses not only man s relationship with god but also provides muslims with a code that regulates their entire way of life

• o a i Oi i i ci i i ci oei i oi i oi oi a a i oi oi i i oi a oa i a oe a i i i R o i i ci Ri oi oi i oi i oi i C oi ui Ra o a i i i ui oi ui oi o a a c gambling maisir a may apply to dealings in a i i i i oe ui c i oei i oi a a i i oi a u a i o a o a i i oi o oi i u i o oei Oa u a i o o ui i R i C oe Yi oi i i oei o oi a o a i oi a o futures and options to the extent that they are speculative
• some or all of the following elements are present this is categorically stated in the qur an a c uncertainty gharar in contracts a there is a prohibition on the sale of items whose existence those who devour riba interest will not stand or characteristics are not certain and upon except as stands one whom the devil hath driven to contractual terms that are ambiguous or unclear

• title to the assets is transferred to the customer a conventional borrowing purchases the asset at the time of purchase but the customer will from the islamic bank at a price plus a mark up provide the same or other assets as collateral to x y which is payable on a deferred the islamic bank for the period of the financing
• costs of purchasing the commodity and an agreed murabaha transfer of transfer of title title to bank to customer vendor islamic bank customer payment of payment on a deferred purchase price x basis of price plus mark up x y notes a

• if the investment makes a loss the investor as the investor provides the funds has to bear all losses unless the loss has resulted from the negligence on the part of the mudarib
• mudarabah return of capital and periodic profits less mudarabah capital mudarib s management fee investment financial investor trading institution rabb al mal activity periodic profits and mudarib return of capital payment of mudarabah capital notes a

• here the contractual investments and can be used to package portfolios of conditions are flexible enough to allow the creation assets whose returns real property lease payments for and sale of participation notes to the investors or example are subsequently shared among the islamic bank who provides the funding which partners

• for a defined period the risk and return associated sukuk sale transfer of assets special sukuk certificates financial lease purpose investors institution vehicle periodic and amortising payments financial borrower rental islamic institution payment global sukuk sukuk certificate proceeds under lease company purchase price of assets the growth of the sukuk market may be attributed to at anything other than face value or from drawing the potential that it provides for liquidity upon established interbank money markets

• purchase from the igs the asset or property upon the the bahrain marketing agency bma is encouraging maturity of the lease at an agreed price which will be local banks and private institutions both inside and used for the repayment of the principal to the sukuk outside bahrain to issue sukuks and is offering to holders
• sukuks must be asset backed and are often structured a c state of qatar sukuk issued in described in as bundles of ijara or leasing transactions especially detail in the next section in which the proceeds where the ability to trade on a secondary market is were partly used to finance the construction of required

• the transaction involved qatar global sukuk qgs the qgs floating rate sukuk certificates are rated a joint stock company incorporated in qatar owned and reflect the long term rating on the state of qatar jointly by the government of the state of qatar and for the following reasons hsbc bank middle east limited issuing rated sukuk a c all amounts due to qgs including the lease certificates the proceeds of which were used for rentals payable by the state of qatar under the general funding purposes by the government of the ijara agreement match and fund the distribution state of qatar

• it involves the issue of bonds in which the companies based in the middle east and north africa payment obligations under the bond are secured mena region for the following reasons against a portfolio of receivables and its related cash a c it is not uncommon for companies in this region flow stream

• the spv may be the asset pool and the implication of defaults by owned by a charitable trust or on certain borrowers on the corresponding performance of occasions by the originator
• a considerable amount of time is spent spv which is established for the specific considering the different likely performances of purpose of funding the assets

• for example such access may allow investors to cure a defect in the securitisation of the following asset classes the caused by the servicer or issuer or even result in the underlying islamic financing structure referred to may investors being able to take over operations from the be utilised servicer if circumstances dictate

• wrap by guaranteeing the performance of the the originator retains the class b sukuk certificates underlying assets and agreeing to repurchase the which are subordinate to the class a sukuk underlying asset pool at a pre determined price on certificates
• for example there are caution needs to be exercised with other forms of stringent saudi laws which prevent foreign ownership credit enhancement as some methods will change the of locally domiciled assets meaning that in this character of the transaction and remove it from the securitisation a foreign domiciled spv could not own bounds of shariah

• furthermore certificates and obtaining a rating was not a shariah requires that payments on the sukuk prerequisite to its purchase of the sukuk certificates certificates must be linked to the underlying assets it was not fatal that a rating was not assigned to the making the nature of the relationship between the structure
• and sic arguments were used to demonstrate attempts to do so in this transaction proved that this relationship was more than a funding prohibitively expensive but in the future this cost may arrangement and encompassed a series of security decrease as a better understanding of the concepts packages

• the structures generally arises where i there is a international swaps and derivatives association mismatch between the currency of the receivables isda middle eastern working group is currently in payments and the payments to the certificate holders contact with regulators in saudi arabia kuwait and ii where payments under certificates are linked qatar dubai and the united arab emirates in an to a floating rate of return which differs from the attempt to formulate such products
• rights under funding power of attorney to sell assets sale of assets sukuk purchaser issuer certificate spv owner spc holders cash funding powers to manage spc obligors assignment accounts spc cash administrator accounts manager payment spc lockbox account collections account spc excess spread account

• unstable tax environment it is reported that kuwaiti and lebanese banks are repacking their non performing loans in the former in the absence of specific legislation tax issues can case those dating prior to the iraqi invasion in to an erode the economics of a securitisation transaction
• this is spurred by pressure from their central in a two tier structure where the owner spv will banks to clear their books in response to the basel ii have to route funds to an offshore issuer spv such and the ias regime

• investor demand will drive the industry and will ensure islamic finance institutions and regulators work together to overcome some of the hurdles discussed in this note
• conclusion it cannot be questioned that islamic finance in particular the sukuk and shariah compliant securitisation market are growth areas

Please note, This is an auto generated summary based on sentances position in the document and other factors

DOCUMENT WORD ANALYSIS

Main Category

AlHuda Material\sukuk islamic

KeyWords

sukuk islam asset finance issu certifi financi contract bankable bond ijarah leas structur profit holder rate developed purchase risk investor

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DOCUMENT REFERENCES

Number of Pages

20

Published Date

2004-09-07 13:50:25

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