Sukuk and capital markets

Sukuk al-murabaha

Certificates that finance goods bought for sale by murabaha; once the goods are delivered, they represent a debt.

Sukuk al-murabaha are certificates of equal value issued to finance the purchase of goods through murabaha, so that the holders own the goods until they are sold. AAOIFI's investment sukuk standard permits trading these certificates after the goods are purchased and before they are sold, but not after the goods have been delivered to the buyer, because they then represent a monetary debt. Its murabaha standard likewise does not permit negotiable sukuk whose underlying assets are only murabaha receivables, which limits how such issues can be structured.

Sources

AAOIFI Shari'ah Standards, English edition (full text, PDF): Shari'ah Standard No. 17, items 3/5 and 5/2/15; No. 8, Murabahah, item 2/2/7

This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.

Related terms

MurabahaA sale at cost plus an agreed, disclosed profit; the seller must own the asset first. Payment is often deferred in instalments.SukukCertificates of equal value representing undivided shares in the ownership of assets, usufruct, services or a project.Tradability of sukukWhether sukuk may be sold on, which depends on what they represent: assets and usufruct, or debts and cash.Asset-backed and asset-based sukukThe distinction between sukuk whose holders have real recourse to the assets and those relying mainly on the obligor's promise to pay.