Sukuk: Investment Based on Shariah

Sukuk: Investment Based on Shariah

Oh sisters in Islam, increase your knowledge!

We do not have to waste energy to avoid transactions that Allah forbids because behind it, Allah SWT gives appropriate alternative and valid based on shari’, as proof of Allah’s love in order to meet all the interests and needs of mankind, and to prevent in the damage.

Excess of liquidity is one of the important problems faced by an Islamic banking since its emergence. Considering the early emergence of Islamic banking, enthusiasms in Islamic investment, prohibition of the conventional bond investment, prohibition of savings and loans along with bank interest are several factors that require Islamic banks think hard in order to produce a set of investment as truly capable of combining real investment in the physical assets with low liquidity in financial and investment with high liquidity in other aspects.

After many researches and long assessment finally it was discovered a new instrument as an alternative to conventional bonds that had scattered around the world, and is called Sukuk. Sukuk represents a document or certificate issuance that its nominal amount of money is the same as asset shares, representing ownership of an object, benefits of an object, rights, or combining between objects and benefits, or even in the form of cash or debt, that already exist in real terms, or that will be made from an IPO (Initial Public Offering) and it is issued in accordance with the laws of syar’i and its provisions.

Sukuk in etymology, is a form plural of ‘sak’, which means payment, when mentioned: : صَكّه صَكّـاً means push and hit with hard, it can also be interpreted as documents used in a transaction, and still many other uses. In conclusion, it is a sign of evidence on a treasure or others.

There is a cautionary note should be known that the foundation and basic principles of the Shari’ah sukuk is: securitization or التصكيك. The meaning of sukuk by standard legitimacy issued by organization Accounting and Audit Islamic finance institutions: “A document that has the same value, represent stock ownership of an object, benefits of an object or service or asset of a particular project. It is issued after the value of sukuk is obtained and door lock IPO as well as sukuk start to be operated. This type of sukuk then is known as Sukuk investment, which has different characteristics with stock and loan bonds.

The History of Sukuk

illustration by aMuslima  Sukuk: Investment Based on Shariah mobile 4 may 2012 015

illustration by aMuslima

In the pre-history, Sukuk investment was not yet known. Sukuk investments include as a new product among the economy world, while for the emergence of the idea to create sukuk is the needs of the community both among the Government and the individual communities as means of funding sources to cover the deficit and boost the economy. In the past in order to realize that goal, each party was forced to use debenture as a source of funding. The debentures are loans collected by the Government from each individual by offering widely, with the agreement of loan repayments plus interest within the time frame agreed by both parties.

Bonds are a document of long-term debt with worth of money. The purpose of the issuance of state bonds is to attract capital from investors. Briefly, bonds are debt but in the form of security. “Issuer” is bonds borrower or debtor in this case is the Government, while the “holder” of the bond is a lender or creditor and “coupon” bonds are loans interest that has to be paid by the debtor (State or Government) to the creditor. With the issuance of these bonds will be possible for the issuer to raise long term capital venture with funding from outside of the company.

The scholars agreed that the transaction is forbidden in Islamic law, the Islamic Fiqh Council in Jeddah established law No: 60 (11/6) in the sixth conference held in Jeddah in 1410/1990 concerning prohibition of these bonds. The decision reads: Bonds represent a commitment to pay certain amount with interest or use other terms, prohibited by Islam either in buying or trading for it is included in the loan-based (interest). Therefore, contemporary scholars and Muslim economists seek a suitable alternative to the forbidden bonds, and raise the idea in the first scientific conference of Islamic economics in 1976 in Dr. Sami Hamoud note entitled “Muqarada bonds”, including the establishment of Islamic banks in Jordan. Then, once submitted to the Ministry in Jordan, they were trying to use this idea to reconstruct the Waqf lands. The idea was also offered to the Islamic Fiqh Council in Jeddah at the fourth session in 1988, and concluded the unified vision and legitimacy standards of sukuk Muqarada.

Since then, Muslim countries around the world began to build bright ideas include the idea of sukuk investments to meet their budget deficits and increased public spending, also build vital installations. Among countries that developed this idea is Malaysia, Sudan, Pakistan and Bahrain. Indonesia in early 2009 has issued sukuk for the first time, then followed by the Hong Kong and Britain, from which it can be concluded that the idea of Islamic investment sukuk can be accepted by all people, especially after the global financial crisis.

 

 

Ria Agustina Tohawi

The author is a mother of one son who lives in Amman, Jordan. She got Master of Islamic Economics at the World Islamic Sciences and Education University, Amman. Editor HPMI Bulletin (a monthly magazine of Indonesian student association) in Amman.

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