Sukuk
Name : NUR ADILAH BINTI MOHD RAHIM Matric No : 2012601398 Group : BM2224A
i. What are the characteristics of Sukuk that make them attractive and investment worthy?
Sukuk which plural of “Sakk” means legal instrument, deed or check. Sukuk is the Arabic name for a financial certificate but may also be considered as Shariah-compliant Bonds. Although Sukuk is generally referrred to as Islamic bonds, it is better described as an asset-based investment as the investor owns an undivided interest in an underlying tangible asset which is proportionate to his investment.
The first characteristic of Sukuk is that the claim embodied in Sukuk is not simply a claim to cash flow but an ownership claim. Monies raised by the issuance of the Sukuk notes are used to invest in an underlying asset, a trust is declared over that particular asset and thereby the certificate holder will own a beneficial interest in that asset in proportion to his investment. Therefore, the investor is entitled to the benefits that entail, inculding a proportion of the return generated by the asset.
The second characteristics is that Sukuk is structured in such a way that the issuance is not an exchange of paper for money consideration with interest as per conventional bonds. Instead it is based on an exchange of an approved asset for some financial consideration that allows the investors to earn profits from the said transaction.
Another aspect of that differentiates Sukuk from conventional bonds from an investor’s perspective, is Sukuk were asset-backed nature. Contrary to the default in payment of conventional bonds and the investors losing all their wealth, the built-in safety aspect of Sukuk being asset-backed reasonably assures the investors of their ability to retrieve a major part of their investment even if things go terribly wrong since they willl be having an undivided share in the ownership of the Sukuk assets.
The next characteristics is the
i. What are the characteristics of Sukuk that make them attractive and investment worthy?
Sukuk which plural of “Sakk” means legal instrument, deed or check. Sukuk is the Arabic name for a financial certificate but may also be considered as Shariah-compliant Bonds. Although Sukuk is generally referrred to as Islamic bonds, it is better described as an asset-based investment as the investor owns an undivided interest in an underlying tangible asset which is proportionate to his investment.
The first characteristic of Sukuk is that the claim embodied in Sukuk is not simply a claim to cash flow but an ownership claim. Monies raised by the issuance of the Sukuk notes are used to invest in an underlying asset, a trust is declared over that particular asset and thereby the certificate holder will own a beneficial interest in that asset in proportion to his investment. Therefore, the investor is entitled to the benefits that entail, inculding a proportion of the return generated by the asset.
The second characteristics is that Sukuk is structured in such a way that the issuance is not an exchange of paper for money consideration with interest as per conventional bonds. Instead it is based on an exchange of an approved asset for some financial consideration that allows the investors to earn profits from the said transaction.
Another aspect of that differentiates Sukuk from conventional bonds from an investor’s perspective, is Sukuk were asset-backed nature. Contrary to the default in payment of conventional bonds and the investors losing all their wealth, the built-in safety aspect of Sukuk being asset-backed reasonably assures the investors of their ability to retrieve a major part of their investment even if things go terribly wrong since they willl be having an undivided share in the ownership of the Sukuk assets.
The next characteristics is the