SUKUK ISSUANCES

Sukuk Issuances in Islamic Banking and Finance

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Table of Contents

Table of Contents2

1.Introduction3

2.Monetary authorities in the UK4

2.1Open Market Operations and Control of the Money Supply4

2.2Critical Assessment and Analysis of Open Market Operations8

3.Sukuk Issuance in the UAE9

3.1Sukuk Issuance and the Supply of Money11

3.2Critical Assessment and Analysis of Sukuk Issuance in the UAE13

4.Conclusion15

Bibliography17

Sukuk Issuances in Islamic Banking and Finance

Introduction

Sukuk is the Arabic word used for the audited statements of finance, but generally used for the Islamic equivalent of bonds. Because, pre-determined or fixed interest is not permitted in Islam. The structure of Sukuk securities is based on Islamic principles of investment and laws that forbid the paying and charging of interest. Financial assets that act in accordance with the Islamic law can be categorized with respect non-tradability and tradability in the secondary market.

The estimation and strategies of conservative for the next 10 year suggest that over $1.2 trillion of assets are directed by the principles of Islamic investment. These Islamic principles and law are part of Sharia. In other words, these guidelines serve as a universal body of moral obligations, spiritual and human rights in Islam. Nowadays, in various part of world, 20 percent customers of banking impulsively moving towards Islamic banking and selecting Islamic financial product, particularly in Asia and Persian Gulf. Islamic finance is a part of global financial market and there is less effort made to avert the participation of conventional investors.

Sukuk financing apparently portray a similar religious idea Jewish or gemach of loans free from interest, as underlined by the positive Torah commandment to lend money and the prohibition of Torah against paying interest on advances. These faith-based non-interest loan schemes can be very confusing for outsiders. A good equivalence is a green or ethical investment. At this point, the cosmos of investable securities is restricted by certain principles based on ethical and moral consideration. Islamic finance is a subset of the global financial market and no or fewer efforts were made to avert the conventional financier to take part in the Islamic market.

Monetary authorities in the UK

The central bank and monetary authority of the United Kingdom is the Bank of England. The core purpose is to maintain financial and monetary stability in the country. Other significant monetary authority of UK is Financial Services Authority (FSA) acts as a regulatory body of the financial services.

2.1Open Market Operations and Control of the Money Supply

The policy of government is to make sure that the citizen of UK, in spite of faith, have right to use competitive financial services. In UK, some retail financial products under Sharia already available such as current accounts and plans of home purchase that do not disburse interest.

There are two types of government wholesale regarding issuance of Sukuk, which are Sukuk al-Mudaraba and Sukuk al-Ijara. Sukuk al-Mudaraba is based on partnership contract, and Sukuk al-Ijara refers to the use of leasing contract.

Figure 1 Sukuk Al-Ijara

Sukuk Al-Ijara contract permits the transfer of assets in return for lease payments under the ...