Contractual Structures and Payoff Patterns of Sukuk Securities

International Journal of Banking and Finance, Vol. 10, No. 2, 2013

32 Pages Posted: 4 Feb 2014  

Meysam Safari

SEGi University

Date Written: November 7, 2013

Abstract

This paper is about the six different Sukuk securities, which originated in 1990s, and are now traded in some 11 markets as the new debt-like securities classed under Islamic finance. The outstanding value of these contracts is estimated to be US $850 billion. This paper proposes a classification for Sukuk contracts as pure debt, equity-based, and asset-backed based on the intrinsic nature and purpose of fund-raising. This classification has more practical use compared to existing classifications. Further, the contract peculiarities of the six instruments (mudarabah, musharakah, murabahah, ijarah, salam, and istisnah ) are carefully specified for the first time. To start a discussion on how the economic behavior may be modeled for theory building, the potential cash flow pattern of each type of Sukuk contracts is specified. The paper aims to contribute to advanced studies by specifying the basic behavioral characteristics.

Keywords: Sukuk, Bond-like socially responsible funding, Sukuk certificates, People, Planet before Profits, Islamic finance, Special Purpose Company, Asset-backed debt contract, Islamic Finance

JEL Classification: G12, Z12

Suggested Citation

Safari, Meysam, Contractual Structures and Payoff Patterns of Sukuk Securities (November 7, 2013). International Journal of Banking and Finance, Vol. 10, No. 2, 2013. Available at SSRN: https://ssrn.com/abstract=2386365

Meysam Safari (Contact Author)

SEGi University ( email )

Taman Sains Selangor,
Kota Damansara, PJU 5,
Petaling Jaya,, Selangor 47810
Malaysia

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