The Islamic Capital Market
How Risk Management Is Different for Islamic Financial Firms
Ten Reasons the West Should Pay Attention to Islamic Finance

Types of Sukuk in Islamic Finance

Sukuk al murabaha (cost plus or deferred payment sukuk)

A murabaha contract is an agreement between a buyer and seller for the delivery of an asset; the price includes the cost of the asset plus an agreed-upon profit margin for the seller. The buyer can pay the price on the spot or establish deferred payment terms (paying either in installments or in one future lump sum payment).

With sukuk that are based on the murabaha contract, the SPV can use the investors’ capital to purchase an asset and sell it to the obligator on a cost-plus-profit-margin basis. The obligator (the buyer) makes deferred payments to the investors (the sellers). This setup is a fixed-income type of sukuk, and the SPV facilitates the transaction between the sukuk holders and the obligator.

The murabaha contract process begins with the obligator (who needs an asset but can’t pay for it right now) signing an agreement with the SPV to purchase the asset on a deferred-payment schedule. This agreement describes the cost-plus margin and deferred payments.

  • Add a Comment
  • Print
  • Share
blog comments powered by Disqus
The Musharaka Contract in Islamic Finance
Who Are the Stakeholders of Islamic Financial Institutions?
Make Purchases with Cost Plus Profit (Murabaha) Contracts
Seven Prohibited Industries in Islamic Financial Investments
Develop New Methods for Managing Risk on the Islamic Risk
Advertisement

Inside Dummies.com