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Sukuk contracts, the money generated from the Sukuk will be used to purchase an asset. Then Sukuk certificate holders have claims on the benefits generated by the asset is the investor. For example, if investors subscribe to RM 1000 with an agreement rate of 10% profit margin, the investor will receive RM 100 and RM 1100 per year at maturity.
The Sukuk has been structured which the issue is not the exchange of money with the certificate alone but is based on the exchange of assets that have been approved with a few scales, which funding will enable investors to re- ceive profits from the transaction. Another aspect that distinguishes between Sukuk and conventional bonds is in a situation where the bond issuer can not repay the debt and interest to investors / creditors investors will lose all the investment as the bond contract is usually no guarantee that the assets can be secured to recover the principal in- vestment.
conveyance of title in real estate or property transactions (which would be required in the context of an Ijara wa iktinaa, or sale-lease- back structure), that the sale contract and the resulting title transfer be recorded in a real estate register and that a transfer of ti- tle fee or tax be paid.
Problems such as lack of uniformity in pro- cedures that had applied the principles of Shariah, the lack of professional qualifica- tions (lawyers, scholars and academics) are
Global total issued Sukuk for 2010
2008 2009 2010
10
In the Sukuk, not Sukuk are not in the contract there must be assur- ance that the money raised from investors was used to buy a property in which inves- tors profit comes from the benefits of the as- set. If a bad situation occurs, investors can still claim some of their investment assets to be secured by collateral to the contract Sukuk.
Challenges in Sukuk Market There are various forms of tax to be account- ed for. For example, in the ECG Sukuk, which was backed by oil and gas assets in the Gulf of Mexico, the structure utilised a funding arrangement that was heavily driven by US tax considerations. Legislation in some ju- risdictions requires, in connection with the
References and Further Reading
• Mushtak Parker, (2010) “Malaysian promotes Islamic finance at international event”, Arab News, 25 October 2010, published. • Mohammad, Shamsiah, Mohd Fadhly Md Yusoff, and Abdul Aziz Al Qassar, (2009), “Ground Rules for Sukuk Issuance” in Sukuk: Islamic Capital Market Series, Malaysia: Sweet & Maxwell Asia. • Simmons and Simmons Company, website:
http://www.simmonssimmons.com/index.cfm?fuseaction=service_industry.display_ left&page=3243&hsf=sukuk (accessed on 2nd February 2011 ) • Wikipedia, the Free Encyclopedia, website:
http://en.wikipedia.org/wiki/Sukuk (accessed on 4th February 2011) • Zeti Akhtar Aziz ,Tan Sri Dato’ Sri Dr. , Governor of Central Bank of Malaysia, Quarterly Bulletin, First Quarter 2010, website: http://
www.bnm.gov.my/files/publication/qb/2010/Q1/bm_p6.pdf • Governor of Central Bank of Malaysia, (2007) “ The Global Islamic Financial Services Industry”, May 14, website
http://www.bis.org/ review/r070515b.pdf (accessed on 6th February 2011) • Malaysian International Islamic Financial Centre (2010), “Welcoming Remarks”, website:
http://award.mifc.com/index.php?ch=ifa_ winner&pg=ifa_winner_recog&ac=446 • Hilton Convention Centre, Istanbul, Turkey,(2009)“ Islamic Finance and Global Financial Stability “, 5 October, website: http://www.
bnm.gov.my/index.php?ch=62&pg=66&ac=345&lang=bm
60 Global Islamic Finance May 2012
The creation of many innovations and initia- tives have also contributed to the advance- ment of Islamic financial system. However, the challenges can be overcome by increased effort in every cooperation, increase under- standing of the Shariah concern, mutual re- spect and collaboration practices.
47,77 31,93 16,22 20 30 40 Amount (US billion) Source: Islamic Finance Information Services – IFIS
experienced in both conventional and Shari- ah standards and lack of awareness among employers and apparently the manager of the Sukuk are also difficult to implement. As a proactive measure, ethical standards of in- spection in accordance with Shariah should be taken.
Prospects for the development of Islamic finance should contain a balanced develop- ment of the Shariah and integrated market by the prospect of a unique Islamic finance. In addition, the products and services must also not limited to Muslim’s market only. But, also emphasizes acceptance and appli- cations globally.
50 60 Sukuk
Conclusion Sukuk now has become the strongest seg- ment in Islamic finance. It is involved in the international market and generates signifi- cant cross-border flow of funds as may be achieved beyond domes- tic markets. Along with hard work, growth and balanced development agenda, all countries have the poten- tial to expand the role of Islamic fi- nance is increasing in contributing to global growth and financial stability.
Investment Sukuk are the ideal in- vestment for investors requiring a fixed investment return with low risk and the Shariah Compliant. Sukuk also should be issued for new com- mercial and industrial ventures. If they are issued for established busi- nesses, then the Sukuk must ensure
that Sukuk holders have complete owner- ship in real assets.
Islamic finance can also be used to estab- lish a stronger financial flows of the entire border to contribute to the common agenda of improving growth and development agen- da to achieve self-sustained global aspira- tions, balanced and growth, and long-lasting economic development. Sukuk instruments has become an attractive new asset class investors as a form of competitive business- es, thus proving the importance of Islamic finance in strengthening financial coopera- tion is increasingly real.
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