The difference however is that the client company

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The difference however, is that the client-company, instead of approaching an intermediary, now directly issues and sells instruments to the investor community. For instance, instead of availing a murabaha credit facility/ ijara facility from an Islamic commercial bank, the company now issues murabaha/ ijara securities (sukuk) to the investor community. Sukuk 6
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Generic Procedure The process involves creation of a special purpose vehicle (SPV) or a ‘Special Purpose Mudarabah’ (with a distinct identity) by the company in consultation with its investment bank for this purpose. The investment bank or the company may act as a mudarib of this SPV-Mudarabah. The SPV-Mudarabah is entrusted with the task of issuing securities to the investing public, raising funds and investing the same in specific types of assets/ projects in order to meet the requirements of the company. The SPV-Mudaraba now “owns” the assets/ projects and the income from the assets/ projects are “passed through” to the holders of the instruments after deducting the mudarib’s share in it. Sukuk 7
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Generic Procedure An alternative method may be the appointment of the investment bank as an agent or wakil of the prospective investors in securities under a wakala arrangement. The bank as the agent of all investors undertakes to invest the funds in specific types of assets/ projects and then to pass on all future income from the assets/ projects to investors after deducting its fee. Sukuk 8
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Sukuk Al-Murabahah Sukuk Client Company SPV Vendor Sukuk 3 2 7 4 5 6 Company seeks advice from Investment Bank; an SPV is created for the purpose; 2. SPV issues securities to investors; 3. SPV collects funds from investors; 4. SPV pays to Vendor for purchase of Assets; 5. Company as agent of SPV takes delivery of Assets; 6. Company purchases Assets from SPV on deferred payment basis and makes payment of installments to SPV; 7. SPV passes them on to investors after deducting mudarib share/ wakala fee for itself. 9
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A potential problem with sukuk-al-murabahah is that these cannot be traded in the secondary market at a negotiated price and hence, are not liquid. Murabahah receivables ($X+P in the above example) are in the nature of pure debt and hence the instrument that is an evidence of such debt can be transferred only at its face value. Sukuk-al-murabahah have, however, been extensively used in the recent past by Malaysian companies for raising funds. The market for such private-debt-securities (PDS) has witnessed a lot of activity because of a more liberal interpretation of fiqh by Malaysian jurists permitting sale of debt (bai-al-dayn) at a negotiated price. Sukuk
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The difference however is that the client company instead...

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