Considering the fact that, Sukuk (Islamic bond) issuance and trading are important means of investment in the modern economic system, Muslim jurists and economists are trying to find the Islamic alternative. However, to meet the various demands of investors Islamic bonds and certificates should be diversified. We have so far the sukuk al-mudarabah (co-partnership bond) or sukuk al-muqaradah (securitised bond), the sukuk al-musharakah (partnership bond), the sukuk al-Ijarah (Lease bond), the sukuk al-istisna‘ (manufacturing bond), the suku al-salam (differed delivery bond) and the sukuk al-murabahah (differed payment bond).
However, it should be noted that although some of these instruments have been generally accepted as being in compliance with Islamic principles so that they can be traded in the secondary market, the negotiability of certain others is still a point of debate and controversy due to their legal acceptability or compliance with Shari‘ah. Therefore, some of these bonds can be traded in the secondary market while the trade of others is limited to the primary market because they can be exchanged only at face value.
In Malaysia for instance, almost all of the domestic Islamic debt papers issued so far have been based on the principles of murabahah (sale by differed payment), bay‘ bi al-thaman al-ajil (sale by differd payment), bay’ al-’inah (buy back sale) and bay’ al-dayn (debt trading), despite the controversy surrounding the issuance of tradable bonds in the secondary market based on the above two contracts. At the same time, there is a perceptible increase in the willingness amongst Malaysian issuers of bonds to explore other Islamic principles of financing, namely the profit-oriented based musharakah (partnership) as well as the asset-backed mode of ijarah (Lease). Hopefully, the future issuance of Islamic bonds will focus on the widely accepted bonds such as sukuk al-musharakah (partnership bond), sukuk al-mudarabah (co-partnership bond) and sukuk al-ijarah (Lease bond).
However, the issue with Malaysian Islamic bonds, which are basically based on the principles of bay’ al-’inah (buy back sale) and bay’ al-dayn (debt trading), which is not well accepted by the Middle-eastern investors. They claim that, the contract of bay’ al-’inah and bay’ al-dayn is seen as something similar to riba (usury) based financing. This practically pose an unwanted challenge to the Malaysian companies expecting Islamic funds from the Middle-east via bond (sukuk) issuance.
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