Sukuk Securities New Ways of Debt Contracting
Produktdetaljer
Om bidragsyterne
MOHAMED ARIFF, PHD, a professor of finance at Bond University, Australia (and the University Putra Malaysia), is widely considered a specialist on Asian Pacific finance and Islamic finance. Formerly, he served as the elected president of the Asian Finance Association. He is a co-author of Investments and has authored or coauthored 33 other books. His scholarly articles have appeared in leading economics and finance journals.
MEYSAM SAFARI, PHD, is a senior lecturer at SEGI University, a private institution in Malaysia. He won a prestigious scholarship from Khazanah Holdings. His scholarly research and teaching is in finance, although he has an engineering background.
SHAMSHER MOHAMAD, PHD, is a professor at INCEIF University. After distinguishing himself in professional duties, he served as the dean of the faculty of economics. His teaching includes post-graduate finance subjects and supervising 25 doctoral students to completion.
Sukuk Securities provides complete information and guidance on the latest developments in the burgeoning sukuk securities markets. Written by leading Islamic finance experts, this essential guide offers insight into the concepts, design features, contract structures, yields, and payoffs in all twelve global sukuk markets, providing Islamic finance professionals with an invaluable addition to their library. The first book to fully introduce the market, this book provides a detailed overview of the sukuk market, with practical guidance toward applying these instruments in real-world scenarios. Readers will learn how sukuk securities are regulated and the issues that arise from regulations, and gain insight into the foundation and principles of Islamic finance as applied to these instruments. Extensive tables illustrate t-test comparisons between conventional bonds and sukuk, risk factors, and the issuance of different types of sukuk securities by country to give readers a deeper understanding of the markets.
In 2010, the World Bank recommended sukuk as the best form of lending for growth in developing countries; since then, the value of new issues has grown at 45 percent per year. The market's present size is close to US $1,200 billion, with private markets in major financial centers like London, Zurich, and New York. This book provides comprehensive guidance toward understanding and using these instruments, and working within these markets.
- Get acquainted with the sukuk market, definitions, classification, and pricing
- Learn the different approaches to structuring and contract design
- Discover how sukuk is applied, including regulations, ratings, and securitization
- Examine payoff structures and suggested sukuk valuation in the context of Islamic finance principles
With the sukuk market growing the way it is, regulators, investors, and students need to fully understand the mechanisms at work. Sukuk Securities is the complete guide to the sukuk markets, with expert insight. July 2014 saw the first sukuk listing in London. Hong Kong and Seoul have also entered this niche market. Predictions are that there will be continued high growth of sukuk debt markets around the world, all providing targeted funding via sukuk contracting modes.
Preface xi
Acknowledgments xiii
List of Tables xv
List of Figures xvii
About the Authors xix
PART ONE The Foundation of Sukuk Securities 1
CHAPTER 1 Introduction to Sukuk Markets 3
Islamic (Participation) Debt Securities 4
The Origin of Sukuk Structures 6
Contemporary Sukuk Securities 9
How Sukuk Securities Are Priced 10
The Structure of This Book 12
CHAPTER 2 Sukuk Securities: Definitions, Classification, and Pricing Issues 13
Fundamental Principles 14
Defi nitions and Regulations 20
Classifi cation Based on Practices 22
Conclusion 29
CHAPTER 3 Pragmatic and Idealistic Approaches to Structuring Sukuk 31
Shariah : The Basic Foundations of Islamic Finance and Sukuk 32
Islamic Financial Principles 35
Three Approaches to Islamic Finance 40
The History of Sukuk 41
Sukuk Structures: Pragmatic and Idealistic Approaches 44
Conclusion 55
CHAPTER 4 Contract Design and the Structure of Common Sukuk Securities Issued to Date 57
Mudarabah (Partnership) 57
Musharakah (Profit Sharing) 59
Murabahah (Markup) 62
Ijarah (Leasing) 64
Salam (Futures) 67
Istisna (Working Capital) 69
Conclusion 70
CHAPTER 5 Samples of Sukuk Issued 71
Sukuk Simpanan Rakyat (Malaysia) 71
Central Bank of Bahrain 73
Khazanah Nasional Berhad (Malaysia) 74
Qatar Central Bank 74
Nakheel Sukuk (UAE) 75
Mahan Airline Company (Iran) 75
Conclusion 76
CHAPTER 6 Contract Design and the Structure of Sukuk Securities Yet Issued 77
Wakalah (Agency) 77
Manfaah (Usufruct) 78
Muzarah (Farmland Leasing) 78
Musaqah (Orchard Leasing) 79
Muqarasah (Tree Leasing) 79
Conclusion 79
CHAPTER 7 Sukuk Securities and Conventional Bonds 81
Comparison of the Yields of Islamic Securities and Bonds 82
Yield Curves 86
The Granger Causality Test for the Yields of Sukuk and Conventional Bonds 90
Conclusion 94
PART TWO Sukuk Securities in Practice 97
CHAPTER 8 Regulations with a Difference 99
Regulating Sukuk 99
Conclusion 105
CHAPTER 9 Securitization, Trading, and Rating 107
Sukuk Trading 107
Sukuk Rating Methodologies 113
Conclusion 123
CHAPTER 10 Worldwide Sukuk Markets 125
The Geographical Location of Sukuk Securities 128
The Effect of Geographical Location on Contract Specifications 137
Conclusion 139
CHAPTER 11 Regulatory Issues for Sukuk Financial Products 141
The Current Sukuk Market 142
Regulation and Shariah Issues in the Current Sukuk Market 143
Current Sukuk Structures 145
Possible Developments and Implications 151
PART THREE Payoff Structures and Sukuk Valuation 161
CHAPTER 12 The Foundation and Principles of Islamic Finance 163
Foundation 163
Principles 164
Conclusion 167
CHAPTER 13 Cash-Flow Identification and Pattern Recognition for Theoretical Valuation Models 169
Zero-Promised Regular-Payment Sukuk 169
Fixed-Promised Regular-Payment Sukuk 171
Variable-Promised Payment Sukuk 172
Undetermined-Promised Payment Sukuk 174
Conclusion 175
CHAPTER 14 A Matter of Choice: Sukuk or Bond? 177
The Economics of Conventional Bond-Based Funding 178
World Markets for Conventional Loans 181
The Case against Interest-Based Debt with No Risk Shared 182
Are Sukuk an Alternative to Bonds? 185
Conclusion 187
CHAPTER 15 Challenges and Future Developments 189
Valuation 189
Liquidity 190
Market Widening and Market Depth 191
Cost of Issuance 191
Variation in Schools of Thought 192
Educating More Experts in Sukuk 193
Regulatory Sufficiency 194
Conclusion 195
Bibliography 197
Index 209
Praise for Sukuk Securities
“Sukuk trading has been rapidly growing in the past and has promising growth potential in both Muslim and non-Muslim countries. Providing an overview of the features, size, contracts, practice and regulatory aspects of sukuk, the book is a useful source of reference for those who want to know and understand the intricacies of these new emerging Shari’ah compliant securities.”
—Habib Ahmed, Sharjah Chair in Islamic Law & Finance, Durham University Business School, United Kingdom
“In the relatively new, yet fast growing sukuk market, the authors have captured and given an in-depth description of all the essential elements of the product and how it can be used effectively in the marketplace. This book is an essential tool for all practitioners and those wishing to understand the sukuk market better.”
—Daud Vicary Abdullah, President & CEO, International Center for Education in Islamic Finance
“This volume is a notable achievement. Within these covers the reader gains a thorough understanding of this new debt instrument. The authors provide a comprehensive account of how sukuk are designed and structured, their cash flows, pricing and trading, along with the issues involved in how the securities are rated and regulated.”
—Mervyn K. Lewis, FASSA, Adjunct Professor, University of South Australia
“Sukuk Securities: New Ways of Debt Contracting is certainly a must-read publication for finance experts and enthusiasts whether they are from industry, regulatory or academia. The authors have succinctly and comprehensively presented the different forms of sukuk structures that have been issued since 1998. They have shown that such debt contracting is pro-growth, able to match different needs and more importantly, an effective solution to the problem of increasing national debts which is helpful to financial stability.”
—Datuk Syed Othman Alhabshi, Chief Academic Officer, INCEIF
“The authors conceptualize sukuk as a mode of financing based on asset ownership and profit sharing. With this as a benchmark, they assess other sukuk concepts and classifications, structuring and issuing practices, regulations, and pricing methods. Their contribution will certainly enrich academic discussions, and their outline of sukuk structures yet to be issued should inspire practitioners.”
—Volker Nienhaus, Visiting Professor, University of Reading, United Kingdom
“This book is a must-read for all those interested in capital market innovations, now that sukuk securities are making huge waves in many parts of the world. The authors provide valuable insights into the mechanics and dynamics of sukuks in terms of both theory and practice. The approach taken in this volume is thoroughly analytical and remarkably refreshing.”
—Mohamed Ariff Abdul Kareem, Professor of Economics and Governance, INCEIF
In 2010 the World Bank recommended sukuk as the best form of lending for growth in developing countries. Since that time, the value of new issues has grown at an astonishing rate of 45% per year.
Sukuk Securities offers regulators, investors, analysts, and students a comprehensive resource that includes a thorough analysis of Islamic debt instruments and information on the latest developments in the burgeoning sukuk securities market. The authors—experts on the topic of Islamic finance—offer insights into the concepts, design features, contract structures, yields, and payoffs in all the global sukuk markets.
Sukuk contracts are based on an entrepreneur and a financier taking a business risk together and sharing the profits, while prepared to incur losses together if the venture does not prove successful. The Sukuk marketplace currently spans over twelve countries, and is expected to further develop as a chosen form of fundraising in the capital markets space.
Sukuk Securities addresses the most common questions and concerns about the sukuk marketplace. The authors clearly define and explain what a sukuk security is and explain how it should be classified vis-à-vis bond markets. The book also explores how a sukuk security is designed and reveals how the various types of sukuk contracts can match the needs of a vast range of issuers in the debt capital markets space—from the agricultural to manufacturing industries. Sukuk Securities clarifies why this form of funding is more suited to today’s market and investment environment, compared to conventional forms of debt contracting, and details the differences between the sukuk market and the common bond market.
Sukuk Securities is designed to be an invaluable addition to the library of any Islamic finance professional or serious student of finance and banking.
Produktdetaljer
Om bidragsyterne
MOHAMED ARIFF, PHD, a professor of finance at Bond University, Australia (and the University Putra Malaysia), is widely considered a specialist on Asian Pacific finance and Islamic finance. Formerly, he served as the elected president of the Asian Finance Association. He is a co-author of Investments and has authored or coauthored 33 other books. His scholarly articles have appeared in leading economics and finance journals.
MEYSAM SAFARI, PHD, is a senior lecturer at SEGI University, a private institution in Malaysia. He won a prestigious scholarship from Khazanah Holdings. His scholarly research and teaching is in finance, although he has an engineering background.
SHAMSHER MOHAMAD, PHD, is a professor at INCEIF University. After distinguishing himself in professional duties, he served as the dean of the faculty of economics. His teaching includes post-graduate finance subjects and supervising 25 doctoral students to completion.