SUKUK
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ISLAMIC BANKING AND FINANCE
Tutorial 9: Islamic Debt Securities & Sukuk
Prepared For:
Prof. Madya Dr. Radiah Abdul Kader
Prepared By:
Group B (Thursday 11.00am – 12.00pm)
TAN JING YING EEE120137
TAN MING FENG EEE120116
TEH VICTOR EEE110142
WONG KAR LENG EEE120125
Tutorial 9: 25/5/2014
Submission deadline (upload Spectrum) : 22/5/2014 (12.00/ 12.00 pm)
Topic: Islamic Debts Securities & Sukuk
Question
1. Define Sukuk and highlight 3 of its characteristics in contrast to conventional bonds. (4 marks)
For literal meaning, Sukuk is mean sak which is cheque in singular and certificate in plural. According to Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Sukuk is defined as a certificate of equal value representing undivided share in the ownership of tangible assets, usufructs or services or assets of a particular project or any specified investment activity. On the other hand, Securities Commission Malaysia (SC) defines Sukuk as trust certificates of participation securities that grants investors a share of the asset along with the cash flow and risks that commensurate from such ownership. Based on the two definitions that given by AAOIFI and SC Malaysia, we can assure that Sukuk is not an Islamic debt security but more accurately as an Investment Certificate as it represents an ownership in specified assets and give returns based in the cash flow originating from the assets. It is an asset-backed ownership because return on Sukuk is fixed as it is based on a fixed cash flow such as rent. This also gives Sukuk another name as a fixed income security. So, Islamic Securitisation has been redefined as a process in which ownership of the underlying assets is transferred to a larger number of investors through papers known as Sukuk.
Sukuk has some characteristics that differentiate it with the conventional bonds. Among the characteristics are asset ownership, investment criteria, issue
ISLAMIC BANKING AND FINANCE
Tutorial 9: Islamic Debt Securities & Sukuk
Prepared For:
Prof. Madya Dr. Radiah Abdul Kader
Prepared By:
Group B (Thursday 11.00am – 12.00pm)
TAN JING YING EEE120137
TAN MING FENG EEE120116
TEH VICTOR EEE110142
WONG KAR LENG EEE120125
Tutorial 9: 25/5/2014
Submission deadline (upload Spectrum) : 22/5/2014 (12.00/ 12.00 pm)
Topic: Islamic Debts Securities & Sukuk
Question
1. Define Sukuk and highlight 3 of its characteristics in contrast to conventional bonds. (4 marks)
For literal meaning, Sukuk is mean sak which is cheque in singular and certificate in plural. According to Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), Sukuk is defined as a certificate of equal value representing undivided share in the ownership of tangible assets, usufructs or services or assets of a particular project or any specified investment activity. On the other hand, Securities Commission Malaysia (SC) defines Sukuk as trust certificates of participation securities that grants investors a share of the asset along with the cash flow and risks that commensurate from such ownership. Based on the two definitions that given by AAOIFI and SC Malaysia, we can assure that Sukuk is not an Islamic debt security but more accurately as an Investment Certificate as it represents an ownership in specified assets and give returns based in the cash flow originating from the assets. It is an asset-backed ownership because return on Sukuk is fixed as it is based on a fixed cash flow such as rent. This also gives Sukuk another name as a fixed income security. So, Islamic Securitisation has been redefined as a process in which ownership of the underlying assets is transferred to a larger number of investors through papers known as Sukuk.
Sukuk has some characteristics that differentiate it with the conventional bonds. Among the characteristics are asset ownership, investment criteria, issue