Illustration by Raimy Sofyan
In the case of restructuring or its application, Islamic sukuk is not much different from the conventional sukuk (bonds). However, when we talk about the context of Islamic finance and its instrument, it is certainly not free from the rules of Islamic law as other muamaalat chapters, from where appears significant difference between conventional sukuk and Islamic sukuk, especially those in the following terms:
a. Basic principles and legal form
Islamic sukuk is not a debt, but joint ownership of an asset / project and in accordance with the principle of profit and loss sharing and it is also a form of middle and long-term investment. Conventional sukuk (bonds) is a statement of debt from an issuer in the form of usurious loans based on a fixed interest rate and a long-term investment.
Release mechanism
Islamic sukuk is released by statutes of IPO (Initial Public Offering) through a public offering and corresponding to the rules of sharia, in contrast to bonds which is only based on a public offering.
b. Trade and turnover
Islamic sukuk along with its variants can be traded and played except salam sukuk and istisna, as for bonds all are rotatable and can be traded without exception.
c. Gains or profits
In Islamic sukuk, amount of profit cannot be ascertained, could be fixed or vary, because profit is based on the basis of profit and loss is shared, different from bonds that their profits can be ascertained in every month with the amount that has been agreed upon earlier.
d. Legality of conversion into shares
Islamic sukuk cannot be changed and transferred in the form of shares, as sukuk is a form of a product or business carried on, while bonds can be converted at any time into shares.
e. Commitment to the rules of Islamic law
Islamic sukuk tied up with rules and laws of Islam, otherwise bond is not based on Islamic law at all.
f. The force of law for owners
Islamic sukuk holders are entitled to ownership of the project assets or rights, as other sukuk holders, on the basis of right of sukuk holders. Therefore they may represent their allies when dealing with outsiders. While bondholders connection to issuer is like lenders and issuers declared themselves as borrowers.
g. Capital guarantee
In Islam there is no capital guarantee for sukuk holders but there may be a third party that is willing to voluntarily guarantee or being a guarantor, provided that the guarantee contract separate from the contract between the two parties in the sukuk, which means that the guarantee is independent. In case of conventional bond, the bond issuer provides a full guarantee on capital and profit to be gained.
Wallahu a’lam
