Dubai Finance

DubaiFinance.com is UAE's leading financial comparison website. Search and Compare Personal Loans, Home Loans, Car Loans, Credit Cards and more

  • Home
  • Credit cards
    • Air Miles Cards
    • Balance Transfer Cards
    • Cashback Cards
    • Cinema Cards
    • Dining Cards
    • Free for Life Cards
    • Golf Benefits
    • Islamic Credit Cards
    • Valet Parking Cards
  • Auto Loans
  • Bank Accounts
  • Business Loans
  • Insurance
  • Mortgage Loans
    • Finance for completed properties
    • Finance for construction of properties
    • Islamic Finance
    • Mortgages for Expats
    • Mortgages for Self-employed
    • Mortgages for UAE Nationals
  • Personal Loans
    • Expat loans
    • House-rent loans
    • Islamic Finance
    • Loans for non-listed companies
    • Loans for self-employed
    • Loans for UAE nationals
    • No Salary transfer
  • Wealth Management

4 Types of Popular Sukuk Structures

article-imgs_new

February 25, 2016 by DubaiFinance.com Leave a Comment

The global demand for sukuk bonds are expected to reach $421 billion in 2016 according to the Islamic Finance Development Report of 2013. The global economy is still recovering from the effects of the global financial crisis. Investors world over are turning to Islamic banking and their products to help steady the market and diminish the gap between the demand and supply of investments. Moves like the British export and credit agency’s decision to guarantee a sukuk bond of $913 million for four Airbus 380-800 with Emirates is inspiring confidence in investors all over the world for such financial arrangements.

Sukuks are essentially Islamic bonds that are issued in compliance to Sharia Law or Islamic financial principles. The party that issues a sukuk, sells it to the investor who then re-issues it back to the seller with a pre-determined return fee. The issuer of the sukuk also makes a promise to buy back the particular bond at a mutually decided later date at par value.

Dubai is the largest economy for sukuk bonds with a total estimated value of Dh 135 billion in sukuk listings. There are various kinds of sukuk structures that are offered by various Islamic banking and financial institutions in the UAE. Some of the popular sukuk structures are as follows:

1. Sukuk al-Ijara

The sukuk al-Ijara is regarded as the most classical sukuk structure since its issuing began in 2008. It is also the most popular kind when you consider the number of sukuks issued. Investors prefer this structure of the sukuk owing to its uncontended compliance with Sharia law. The familiarity of how it operates is another factor that draws investors to the sukuk al-Ijara. If a company owns assets that are free from any debt, the assets can be put up for sale or lease. It makes sense for such a company to opt for the al-Ijara model. EIBOR or LIBOR can be used to determine the rental payment cycle.

2. Sukuk Mudarabah

For people or organizations that do not own actual tangible assets, opting for the Sukuk Mudarabah structure is appropriate. The owners of Mudarabah sukuks are providers of capital and they own equivalent shares of the same value as their capital investment in the Mudarabah pool. Owners of such bonds can easily sell their deeds in the securities market.

3. Sukuk Murabahah

In this alternative structure, the equivalent of the Western mark-up principle is used. The issuer of the sukuk acquires the tangible assets in question and acts as a trustee on behalf of all the sukuk holders. The commodities are sold to the holders at a deferred payment. This model of sukuk is not popular owing to its rigidity and lack of negotiable instruments.

4. Sukuk Musharakah

The Musharakah structure is also suitable for organizations who do not have real tangible assets and therefore cannot avail a sukuk al-Ijara. In this type of structure, funds are mobilized for establishing or developing a business activity.

There are other sukuk structures as well which offer their purveyors the flexibility and ease to choose an investment format that best suits their needs. For more details on Sharia compliant products and financing options, visit Dubai Finance.

Related Post

  • Key Islamic Banking Products for SMEsKey Islamic Banking Products for SMEs
  • How to Get a Mortgage Loan in the UAEHow to Get a Mortgage Loan in the UAE
  • Understanding Personal Finance under Islamic BankingUnderstanding Personal Finance under Islamic Banking
  • How Islamic Credit Cards WorkHow Islamic Credit Cards Work
  • Five Islamic Credit Cards to ConsiderFive Islamic Credit Cards to Consider
  • 12 Credit Cards with No Annual Fees & High Rewards in the UAE12 Credit Cards with No Annual Fees & High Rewards in the UAE

Filed Under: Islamic Credit Cards, Islamic Finance, Islamic Finance

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Search

Connect with us

  • 
  • 
  • 

Recent Posts

  • Best Supermarket Practices to Spend Wise and Save Smart March 8, 2016
  • Understanding Personal Finance under Islamic Banking March 8, 2016
  • Two methods to help you tackle your debt March 8, 2016
  • What you need to know about Credit Shields March 8, 2016
  • Understanding Content Insurance for Your Home in the UAE March 8, 2016

VOYAGER BY NAJM SIGNATURE CREDIT CARD

ABOUT US

Dubaifinance.com is an independent comparison website with a purpose to provide financial information to users which helps them make informed decisions to buy credit cards, loans in UAE. Read More

RECENT

  • Best Supermarket Practices to Spend Wise and Save Smart
  • Understanding Personal Finance under Islamic Banking
  • Two methods to help you tackle your debt
  • What you need to know about Credit Shields
  • Understanding Content Insurance for Your Home in the UAE

SEARCH

Disclaimer

© 2021 DubaiFinance · All Rights Reserved ·