Islamic Finance and Sukuk Instruments

This assignment delves into the realm of Islamic finance, with a particular emphasis on Sukuk instruments. It examines the theoretical foundations of Islamic finance, its practical applications, and the regulatory frameworks surrounding it. The analysis also explores the structure, issuance process, and benefits of Sukuk as an alternative financing mechanism in both domestic and international markets. The assignment incorporates relevant literature, research findings, and current trends to provide a comprehensive understanding of Islamic finance and its evolving role in the global financial landscape.

Chartered Banker MBA Programme
ASB9039 Islamic Banking & Finance

TABLE OF CONTENTS
Introduction................................................................................................................................3
Analysis of the reasons for the funding difficulties faced by Lend Lease.................................3
Sukuk as financial source for funding of Olympic Village....................................................3
Funding from sources except conventional finance and importance of Olympic label in
collection of funding..............................................................................................................4
Suitable Sukuk during construction and post-construction phase..........................................6
Pricing strategies for Sukuk...................................................................................................8
Trading of Sukuk in secondary market..................................................................................9
Mechanics of the process.....................................................................................................11
Sukuk issuance and its impact on other Islamic finance products.......................................13
Conclusion................................................................................................................................17
References................................................................................................................................18

LIST OF FIGURES
Figure 1: Comparison of conventional and Islamic securitized securities...............................18

INTRODUCTION
Sukuk is a novel concept in the field of finance which is in due compliance with shariah
principles. Sukuk are indeed attractive instruments for the Islamic Financial Institutions and
manage those funds that cannot be otherwise invested in conventional securities. Sukuk was
developed as a significant mechanism for raising funds in the international capital market by
an acceptable structure (Godlewski, Turk-Ariss and Weill, 2013). The current report
emphasizes on an a deeper understanding of the concept Sukuk and its relevance in
international events like Olympic village. Further, different types of Sukuk are analysed to
identify the suitable Sukuk during construction and post-construction phase. Moreover, then
its pricing strategy and applicability in the secondary market are evaluated. Lastly, the Sukuk
maturity in the event of housing units is assessed and a report is presented to have a deeper
outlook over the whole concept. It is a kind of security which provides bank and companies
to decrease the increase in the volume of transactions based on Murabahah contract through
this instrument.
ANALYSIS OF THE REASONS FOR THE FUNDING
DIFFICULTIES FACED BY LEND LEASE
Sukuk as financial source for funding of Olympic Village
Similar to the authentic and conventional bond in Western finance, Sukuk is a form of
Islamic finance certificate, which is in compliance with the religious laws of Sharia-Islamic.
It was first issued by Malaysia and Bahrain soon followed its suit in 2001. The instrument has
support of physical assets and balance sheet, thus Sukuk bonds can be applied for financing
method for government agencies and even for private institutions. Since the traditional
westernised bonds are interest bearers bond structures and Islamic laws abhor loans that
borne charge or interest (El Qorchi, 2005). Due to its non-permissibility in Islamic, the
introduction of Sukuk was made wherein Sukuk sells off the investor with a group of
certificate and further uses the proceeds to purchase an asset in which the group of investor
holds their partial ownership. Herein, the issuer is also liable to make a contractual promise
to buy back their bonds at par value in future stance.

In other words, Islamic law prohibits the principle of ‘riba’ i.e., interest. Thus, conventional
western instruments couldn’t be applied to investment vehicles. In this case, Sukuk applied
the concept of asset monetization wherein the cash flows accumulated from the pool of
resources are periodically distributed, to copy the coupon payment concept. This indeed helps
the investors to work around as mentioned in sharia and at the same time avail benefits from
debt financing. But nevertheless, the structure and mannerism of Sukukdirect only towards
financing those that might be raised for those assets that are identifiable.
Therefore, Sukuk presents an aggregate as well as undivided shares of ownership in the form
of tangible assets as it associates with a specified project or any particular investment
activity. Hence, no investor of Sukukholds any debt obligation due to the bond issues rather it
owes a piece of the asset, which linked in particular to such investment. As per the market
operators, this structure encompasses overwhelming conventional investors where the
standout point is that it is a mere mechanism for facilitating all transaction (Archer and
Karim, 2002). The legalised consequences and payoffs are same as those of a traditional
bond.
Already the Middle East has been pouring filthy cash into the UK for instance; Qatar owns
95% of Shard Harrods, over a quarter of holdings in Sainsbury, a fifth of Chelsea barracks,
Olympic village much more. Therefore, if Sukuk makes a debut it will hold a great level of
financial openness as well as harmony between the Islamic World and Britain. The Islamic
system of finance indeed provides humongous benefits like they are less exposed to the crises
and are designed in a more effectual manner to deal with risk. Since speculation is totally
prohibited and financing is base on assets thus making it a safer choice. Further, it fosters
financial stability by harmonizing the regulations as well as setting standards that protect the
investors. As a part of governance, it also enjoys a greater form of transparency in
determining payouts. Indeed the Sukuk will not hamper but rather facilitate prospects by
funding in Olympic Village.
Funding from sources except conventional finance and importance of Olympic label in
collection of funding
With global challenges drifting in paths of international events require more
considerable financing than the predictable financial source. It is important to undertake new

sources of finance than relying on conventional sources.For the development, marketing and
other activities that take place internationally it has been felt seriously that NSFs (National
Sports Federation) is not required to look up to government exclusively for the funding of its
activities (Zin and et al., 2011). The NSFs must keep an open approach and look forward to
other sources to fund their operations and to upkeep their financial support of government
also. The government is required to be holding significance but in a supplement nature only.
The government has played a substantial role in influencing the decision. But nevertheless, to
keep pace with new environment the scheme to Islamic funding is to be used for important
events such as Olympics, CWG, Asian Games, international tournaments and other events
that are possessing a high reputation and international significance because of their major
disciplinary (Abedifar et al 2015).
By considering approach Islamic funding is a new concept and the investors for the same is
not easily available. To develop its social mandate and respond to the increasing demand by
openly discussing issues, recognizing the hurdles and coming up with shared solutions to use
the Islamic finance. Olympic Village associating itself with Islamic financing with help in
outreaching the masses who were unlikely to influence (Schoon, 2009). Though there are still
some unanswered questions but the prominent role played by the Islamic finance in
advancing the industry looks like a more sound as well as sustainable approach.
A lot of amount of financing for the Olympics is extracted from the sponsors. The Olympic
Brand is indeed an attractive offer for all sponsors who aspire to have the global recognition
as well as goodwill linked to such games. The MNCs put in staggering sums to be a part of
the exclusive club of the recognizable and official sponsors. The laws of Olympic Village
indeed go beyond the conventional finance. Its approach towards the Islamic funding is
though odd but a prospective one as it will help in generating worldwide public interest and
present a tempting opportunity for all those who couldn’t be official sponsors or who do not
choose to be as well. Further, it can be said that all in all it creates ambush marketing.
Even in the event that the issue might be snapped up but it is going to revolutionise the
financial relationship conduct with the Islamic world. There is highly unlikely that the policy
will lead to any difference in the lives of Muslim but the inclusion of culturally catered bond
can help in addressing the inequalities and instabilities that lean on foreign or government

capital. The extent to which the Olympic village finance policy leans to Islamic idea of
finance can be a matter of debate but could help in dissolving the expected standards.
Nevertheless, it is interesting to set forth the importance of Islamic funding in an international
event like Olympic Village.
Suitable Sukuk during construction and post-construction phase
The asset supported nature of Sukuk financing has surfaced as a competitor to the traditional
financing of mega-construction projects, coupled with the concept of joint business risk. With
economic crisis and outlook of the international lending market being uncertain, traditional
financing options like funding through bank may not be completely capable of shouldering
the huge financing task of Olympic Village in the UK. Sukuk investors normally have a taste
for longer tenors and favour predictable plus stable cash flows – characteristics usually
related to infrastructure projects (Brighouse, 2016).
The market for Sukuk financing is maturing in the UK and various types of Sukuk structures
have emerged over the years. They could be of several types based on the type of Islamic
mode of trade and financing utilized in its structuring. Some of these Sukuks are tradable
while some are non-tradable underpinned by the characteristics and type of the issues Sukuk.
There are also many mixed assets and diversified Sukuk which surfaced in the marketplace
like hybrid Sukuk, wherein the underpinning pool of assets can consist of Murabahah,
Istisna’a and Ijarah. In any Sukuk transaction, issue of Sukuk certificates will raise the
amount of cash needed by the originator (Osborne, 2013). The issue in itself will not make an
investor eligible to an ROI and hence, should be supplemented with other financing
structures.
Though it is plausible to interpose a sukuk issue onto any financing system, factually, the
most dominant structures employed in the Sukuk domain are Ijarah, Murabahah, Istisna and
Mudarabah.
Sukuk al-ijarah
Sukuk al-ijarah basically entails an originator and SPV issuer entering into a purchase and
sale agreement pertaining to some assets and an ijarah agreement for leasing such assets back
to the originator. The SPV issuer uses the proceeds from the issuance to acquire the assets
and periodically reimburses the rental income to the holders. At maturity, the asset is then

sold to the originator under a sale and the proceeds are disbursed within Sukuk holders
(Vizcaino, 2015). If the originator is unable to pay his rent or other duties the Sukuk holder
might vote to force the SPV issuer for exercising its rights under a put undertaking wherein
the originator purchases the assets back.
The main demerit of this system of project financing is that the company might not have the
assets during the beginning of the construction on which to underpin the structure. While a
Sukuk al-ijarah may be appropriate for refinancing at the conclusion of the project, for
construction stage, non-existence of tangible assets might dominate a different structure.
SukukAl-Murabaha
SukukAl-Murabaha has the benefit of not needing the originator to place its own,
unencumbered assets in the structure. This entails a cost-plus transaction of commodities that
are marketable, usually metals traded on the London Platinum and Palladium Market or the
London Metal Exchange. Sukuk proceeds are used by the issuer to obtain commodities from
the marketplace, which are traded with the originator at a markup and on deferred payment
terms. The markup of the issuer might be benchmarked against a traditional index like
LIBOR or be fixed. The originator instantly sells the commodities in the market in order to
acquire funds (Kamali and Abdullah, 2014).
If the rate of return is benchmarked against a traditional metric, periodic commodities trades
will need to be re-set. Usually, the proceeds of every periodic cost-plus transaction would be
achieved against the deferred amount to be paid in terms of the prior transaction so that just
one deferred payment is owned by the originator at any given time. However, there are two
major demerits of this structure. Firstly, it builds a debt instead of interest on the asset and
hence a pure Murabaha cannot possibly be traded if not on par (Choudhury, 2011). Hybrid
structures where Murabaha payment liabilities comprise a minority of the holders’ return.
Secondly, there is a preference among the Shariah researchers for structures based on trades
or assets related to the actual business of the originator to circumvent any possibility of
artificiality. The AAOIFI Shariah standard outlines that Islamic financial institutions must
prohibit the use of monetization to the cases of customers whose transactions could not be
disposed of by other ways of investment and financing (Yucel, 2012).
Sukuk al-istisna

Out of the above-mentioned options, Sukuk al-istisna is the most suitable structure for the
construction and post-construction stage of the Olympic Valley. The term istisna implies
procurement. It is a contract to manufacture or construct an asset in return for up-front
payment. Under this regime, the SPV issuer issues certificates of Sukuk to investors in terms
of the sum of the issue proceeds. The SPV issuer, as a buyer, pays the proceeds in context of
the construction and delivery of the project to the investor as per the arrangement of Istisna
agreements (Hussain, Shahmoradi and Turk, 2015). While the tenor of Sukuk the ROI is
produced:
 During the period of construction, under a forward lease of the assets
 Post the delivery under a lease of the finished istisna assets
In every case, by the SPV issuer to the investor who pays, rental and advances rental.
The SPV issuer assigns the originator to be its serving agent for repairing, maintaining and
ensuring the istisna assets. On maturity, the initial investment of the investors is paid back on
the same date as of eventual payment is made under the lease (Brighouse, 2016). The
mechanics for such return is the selling of the assets from the issuer to the investor for an
Exercise Price corresponding to the sum of the proceeds of the initial issuance.
Pricing strategies for Sukuk
Sukuk al-Istisnaimplies an “Islamic project bond”. Since, its structure is mainly based keenly
onto raising funds for the construction phase of a project, by using the procedure from Sukuk
the issuance is used to pay the contractor who further delivers the project in near future. With
the issuance of Sukuk, the originator falls into an istisn’a contract with the trustees, in
reference to which the originator gives its assent to construct or manufacture an asset
(Ariffand Iqbal, 2011). Since the process and issuance of Sukuk are new and has yet to
develop an asuitable mechanism in comparison to the conventional bonds pricing is one of
the main concerns for Sukuk. The key reason for it as a challenging prospect is because there
is the absence of Islamic benchmark rate like EURIBOR or LIBOR to determine a key
pricing strategy for Islamic instruments. Furthermore, even Shariah Law imposes restrictions
on trading indebtedness in lieu u any Sukuk issuance. Thus, Bond Market Guide, Deutsche
Bank had separated different form of Sukuk into two major categories i.e., tradable Sukuk at
market price and transferable Sukuk at face value. Sukuk al Istisna is placed in the second

category of the pricing mechanism. Sukuk pricing is based on Shariah principle and thus its
ascertainment is a challenging task.
Also, the importance is placed upon credit rating as a major factor in determining the pricing
of conventional bonds, as it also turns out to be a major factor in Sukuk pricing as well. In the
present, London Interbank Offered Rate (LIBOR) is one of the most common benchmarks
that is adopted in defining the price of other instruments of rental based return while the same
for Sukuk is undesirable in Sharia Law as it is an interest-based benchmark (Al-Amine,
2008). Rating contemplates varied enhancement tools such as guarantees, letter of credit
sinking fund or any type of another mechanism. In 2002 IIRA, Islamic International Rating
agency was established by Bahrain Monetary Agency to independently evaluate, analyse and
rate Islamic banks and instruments. The key issue in rating is bringing possible danger on the
authentic spirit of Islamic Finance on traditional interpretations of Fiqh Al-Muamalat. Also,
the risk in the conventional rating of Sukuk is likely exposure to returns of original assets
wherein the return is dependent upon the creditworthiness of an issuer or cash flows formed
by way of original assets and the positioning of Sukuk in contrast to other financial
obligations of the issuer.
After two years of British government launch of the first sovereign, Sukuk was issued outside
the Islamic world, the Banker Association were required to be active in Shari’ah compliant
market and develop a program of Sukuk issuance to optimise as well as capitalise on
succeeding of its initial issues. Indeed all the five banks involved in the program proposed
that Sukuk is required to be priced on par with conventional UK government bonds, as the
highly rated sovereign guarantee can create premium pricing versus the traditional bonds
(Nazar, 2015).
Trading of Sukuk in secondary market
Sukuk can be treated as a negotiable instrument and hence be bought as well as sold in the
secondary market. The secondary market is indeed a market wherein the previously issued
securities can be traded. The Islamic financial Marketplace comprises of about 1.3 billion
Muslims and one of the fastest growing and active religions across the globe. It has been
observed that trading of Sukuk is a key challenge to Shari'a scholars as well as for bankers as

the debt cannot be traded until some dire restrictions in reference to it are met. The key
requirements for the trading of Sukuk in the secondary market are as follows:
1. Debt trading: A valid transaction, which exclusively involves sale and purchase of
debt certificate, which confirms to Shari'a law.
2. Guarantee transfer: A guarantee contract wherein the guarantor countersigns any
claim or obligation that is required to be fulfilled by the owner of the asset.
3. Open market bidding trading: it is an action by the person to sell their asset in the
open market by way of bidding process amongst potential buyers. The sale of the
asset will be given to that person who offers the highest bid. The transaction of sale or
purchase is based on the tender.
4. Ownership right: An asset in the form of ownership right as provided by Shari'a,
which is tradable (Ariff, Iqbal and Mohamad, 2012).
5. Remittance: A contract is required which allows the debtor to transfer down its debt
obligation to a third party (Ahmed, Islam and Alabdullah, 2014).
6. Collateral: an asset which is made by this act as a pledge for the debt.
7. Pre-agreed contract: Sales as well as repurchasing of underlying assets of which
price is already agreed by parties prior to the completion of the contract.
The above components are required for effectively trading Sukuk in the secondary market.
There is a considerable risk linked with Sukuk as a market risk as Sukuk trades in the
secondary market as and when the fluctuation is seen in the market it is likely to impact
Sukuk as well. Despite all the apparent advantages in IstisnaSukuk they are not tradable
during the construction phase and are less attractive in the secondary market.
Sukuk have been indeed enhanced via securitization of the income stream from the
development. As the current structure of Sukuk is comparatively different from the
originalSukuk used are now likely similar to the conventional concept of securitization, a
procedure wherein the ownership of the underlying asset is assigned to a comparatively larger
number of investors by certificates that represent the proportionate value of the relative assets
(Shaikh and Saeed, 2010).

Sukuk is seen to be appropriately suited for the infrastructural financing as the risk-sharing
aspect of the property also helps in filling up financial gaps. Further, the national authorities
must thus pay attention to developing of necessary infrastructure which encompasses
promotion of true securitization as well as enhanced clarity over the investor’s rights and
stepping up on the regular sovereign issuance for providing a benchmark to the private sector.
Enhanced sovereign issuance must be underpinned by sound public financial management.
Mechanics of the process
Islamic forbids on any interest or quasi-interest based lending. The idea of Sukuk is quite
clear and the subject matter of a Sukuk is both movable as well as immovable properties.
Further, the use of this asset is in form of using or can be rented.Real estate is to be
considered of esteem importance in asset class for the Islamic compliant oriented transactions
as well as banks. Islamic finance is using real estate as a tangible asset class and investable
opportunity on which it can base its financial structure. The focus onto real estate by Islamic
finance has been since the 1990s (Rethel, 2011). The Islamic property investments have its
prime focus on residential property. For instance, Ijara Sukuk represents ownership of
equalised shares in a rental or any usufruct of real estate.
Further, the Istisna Sukuk also finance the reclamation as well as the infrastructural
development of residential development projects.Sukuk maturity in this could have been tied
to selling/renting of the housing units. They encourage housing finance during a construction
phase. As per the case study of Kingdom Instalment Company LLC, a privatised finance
company established in Saudi Arabia issued Sukuk through its SPV (Special Purpose
Vehicle) in Cayman Islands (Ahmad, 2010). The Unicorn Investment Banks was serving as
the lead arranger andShari’ah advisor. The Sukuk attracted investors from Asia and Europe
backing up them by real estate lease contracts which were entered into by Dar Al-Arkan Real
Estate Development Company (DAAR). The purpose of this Sukuk was to leverage the
housing finance to provide the homebuyers in Saudi Arabia with considerable funds to
purchase their homes in lieu of affordable monthly instalments.
Herein,

1. Issuance of the Sukuk: SPV as an issuer has issued the above Sukuk, showcasing an
undivided interest in ownership of underlying assets and the right alongside SPV
aimed at the periodic allocation of amount and dissolution of the amount (Zulkhibri,
2015).
2. Istisna’a Arrangement: KIC is the originator, which has entered into the arrangement
as a trustee. The trustee pays of the contract price in payment phase set in lieu of
certain milestones and return of the assets.
3. Subscription of Sukuk is paid through proceeding of SPV and creation of the trust.
4. IjaraMawasufa fi al-dilemmaArrangement: herein, SPV agrees to lease the acquired
asset to the KIC who is the originator of a term indicating the maturity of Sukuk. KIC
as a lessor and originator further paid in advance former to deliver the assets as well
as the actual rentals.
5. Periodic Distribution to investors is made by using the rental payments received by
SPV.
6. Sale and Purchase Agreement of Assets: After making an optional call and the
delivery of assets, SPV as a trusted sold and KIC as the obligatory purchases the
assets at an exercise price which equals the principal amount and any unpaid
distribution or accrued amount (Ahmad, Daud and Kefeli, 2012).
7. Servicing Agreement: SPV as a trustee and appointed KIC as a servicing agent for
administering the underlying assets in IjaraMawasufa fi al-dimman agreement which
encompasses insurance, maintenance and payment of taxes against the underlying
assets.
8. Payment of any dissolving amount: SPV as an issuer makes use of exercise price it
got to pay the dissolving amount to the respective investors.
Unlike the conventional bond offering, Sukuk offers allow both growing of Islamic
investors and Western institutional investors. Therefore it will help in yielding better return as
the market grows it is seen the best way for Sukuk is to diversify its portfolio to attain higher
returns by way of investment in the emerging sectors like real estate. Though primarily the
investors are based from Muslim people it will pool up the attention of World’s largest and
vital investors like US, Europe and Asia (Iqbal and Mirakhor, 2011). The housing sector will
help it in relating to basic needs and diversify the overall funding base.

Sukuk issuance and its impact on other Islamic finance products
Equal value certificated been published in order to mobilize funds for productivity. Once
manufactured, the ownership of goods will be given to sukuk subscribers.
The finance raised from contribution is considered to cover all the costs incurred during
production. Thus, ownership of goods by Sukuk holders, being allowed to sukuk’s sale price
and selling price of fundamental goods been sold to deal on Sukuk al istisna’a given that
finance raised was used to generate goods being owned by shareholders of sukuk. However,
as per the views of Oyelade, (2016) in case, the funds rose paid immediately in order to
purchase the same good via a similar istisna’a, further the underlying will be said as a debt
type, and dealing with debts is not usually acceptable by shari’a.
At present era the subject of Islamic finance, the istisna has improved in a specific tool in the
finance of Islam of the construction stage of the project, sometimes it is related to be similar
as the turnkey agreement of fixed price. For enabling investors to get as a return on the
specified period, during the construction of assets as per the arrangements of istisna
arrangement, a few scholars of Shari endorsed the utilization of a forward let out deal (termed
as ijaramawsufah f al-dimmah) along with specified istisna contract(Valdez and Molyneux,
2015).
Therefore, Sukuk al-istisna frequently comprises an arrangement of istisna arrangement along
with an arrangement of the forward lease, while the method of istisna is used by investors to
progress funds to an inventor, and the ijara offers one of the most suitable methods of
payment to investors. While making use of the phase of payments might, however, lead to an
unused proceed amount of Sukuk issuance been found in the outlay for a long-lasting period
of construction. The risk which is faced by holders of Sukuk securities comprises the
following main risk:
Risk relating to asset loss: In any case loss occurs to the relevant property with which bonds
are backed up then the value of the asset is reduced to the same extent. It also affects the
value of security of Sukuk holders; however, the risk can be reduced by insuring the assets.
Risk relating to interest rate: The securities which are invested in lease assets provides a fixed
rate of interest. However, in case the current market interest rate enhances that the

apportioned profits are provided to holders of security in comparison with existing interest
rate in the market.
Risk relating to decreasing in the price of asset: In case the value of assets with which
securities are backed up decreases due to any reason than the holders have to born capital
losses. Further, risk can be reduced to a major extent through granting selling authorization to
the Sukuk security holder.
Hence, it might be vital to assess these amounts while making an investment in Shari’a-
compliant for the mitigation of negative factors that will affect funding process of the
Olympic project. That is distribution made in periods while cash stays as unused, a situation
that is expected to be undesirable to the inventor. However, it must be taken into
consideration that the approach to investment of these unused proceeds of Sukuk has stood up
to get some criticism (Valdez and Molyneux, 2015). On the issuance date, there are
publications of Sukuk al-istisna planned by inventors on NASDAQ Dubai.
The (QREIC) that is Qatar Real Estate Investment Company Sukuk contribution in 2006, in
which it itself has an element of istisna to its outlay, is registered at the Euro MTF market of
the Luxembourg Stock Exchange. The second issue of Sukuk in 2008 through National
Central Cooling Company (Tabreed) also has an istisna and is registered on the London Stock
Exchange.
Type of security
Ownership
Recourse
Debt based fixed income
Shareholder does not
have ownership of assets
has an ownership on
security in opposition to
assets
Security holder is not
entitled to recourse on the
underlying assets at the
distress event
Hybrid based on the agreement
and underlying asset. It can be
fixed income (quasi) or sharing
of risk or can be both.
Holder of security owns
interest in the underlying assets
Security holder holds recourse
regarding the underlying assets
at the distress event
Depends upon likely yields,

Variables of pricing
Link with value of asset
Depends upon likely
yields, existing return
levels and the variables
impacting the underlying
asset and the decisions of
the owner while making
finance second time
(Valdez and Molyneux,
2015).
There is no direct
communication to the
marketing value of
underlying assets.
Variables which are
indirect like LTV can be
used as alternative
Protection of principal is
there, despite market
value of underlying
(Valdez and Molyneux,
2015).
marketing value, existing
return level of the underlying
assets
Generally, other or final
payments might have a linkage
to the marketing value of
underlying.
The principal has a linkage
with a market value of
underlying (Rhule, 2016).

The comparison between traditional and Islamic securitized securities. In accordance with
study of Oyelade, (2016) former is set to be the best tool that is damaged by the structural
ownership and variable of pricing strategies like existing rate of interest and creditability.
Further, there is no direct communication to the goods and the security reassigns the risk and
uncertainty from the issuer to investors. While the latter is set to be relying on underlying
agreements and goods to contradict is it is an instrument of a fixed or equity-type (Abedifar
and et.al. 2015). Pricing is set on likely yields, marketing value existing return level and
anticipated fair value at maturity. The holder having security is said to be the real owner of
underlying goods, as the alternative is provided in cited case of anguish. Moreover, security
offers a sharing of risk approach is been suggested by the Shari'ah. In accordance with the
debt market standards, been termed in the traditional system of finance, is banned, capital
markets of Islamic finance have to be extensive (Varriale, 2014). While, in general, stock
markets comprise a high instability linkage of an asset in security markets can offer broad
risk or return portfolio and therefore there will be immense benefits of diversification.
CONCLUSION
The Islamic compliance finance is proving out to be an alternative source of funds that are
successfully beginning to enter the European market. Sukuk is becoming one of the strongest
segments generating an across-border flow of funds beyond the domestic market. It has been
approached for the famous Olympic Village and contributes to global growth as well as
financial stability. Furthermore, there is a requirement for sustaining the development of
Sukuk market and Sukuk structure. This indeed needs close cooperation among the Shariah
Islamic law. The aim of Sukuk is to be valid and meet the requisite objective but first and
foremost being in compliance with Islamic laws. Thus, with the introduction of Sukuk will
lead to the growth of the real economy. The market for Sukuk financing is maturing in the
UK and various types of Sukuk structures have emerged over the years. Sukuks are therefore
tradable and some of the key non-tradable Sukuk domain are Ijarah, Murabahah, Istisna and
Mudarabah. Lastly,

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