Sukuk (Arabic: صكوك, plural of صك Sakk, "legal instrument, deed, check") is the Arabic name for a financial certificate but can be seen as an Islamic equivalent of bond. However, fixed income, interest bearing bonds are not permissible in Islam, hence Sukuk are securities that comply with the Islamic law and its investment principles, which prohibits the charging, or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.
Conservative estimates by the Ten-Year Framework and Strategies suggest that over $700 billion of assets are managed according to Islamic investment principles.[1] Such principles form part of Shari'ah, which is often understood to be ‘Islamic Law’, but it is actually broader than this in that it also encompasses the general body of spiritual and moral obligations and duties in Islam.
Sharia-compliant assets worldwide are worth an estimated $500 billion and have grown at more than 10 per cent per year over the past decade, placing Islamic finance in a global asset class all of its own. In the Gulf and Asia, Standard & Poor's estimates that 20 per cent of banking customers would now spontaneously choose an Islamic financial product over a conventional one with a similar risk-return profile.
With its Arabic terminology and unusual prohibitions, Sukuk financing can be quite mystifying for the outsider. A good analogy is one of ethical or green investing. Here the universe of investable securities is limited by certain criteria based on moral and ethical considerations. Islamic Finance is also a subset of the global market and there is nothing that prevents the conventional investor from participating in the Islamic market.
Al Ajr: Refers to commission, fees or wages charged for services.
Al Rahn Al: An arrangement whereby a valuable asset is places as collateral for a debt. The collateral may be disposed off in the event of a default.
Al Wadia: Resale of goods with a discount on the original stated cost.
Amana/Amanah: Lit: reliability, trustworthiness, loyalty, honesty. Technically, an important value of Islamic society in mutual dealings. It also refers to deposits in trust. A person may hold
property in trust for another, sometimes by implication of a contract.
Bai Al-Arboon: A sale agreement in which a security deposit is given in advance as a partial
payment towards the price of the commodity purchased. This deposit is fortified if the buyer failed to meet his obligation.
Bai al Dayn: Debt financing: the provision of financial resources required for production,commerce and services by way of sale/purchase of trade documents and papers. Bai al-Dayn is a short-term facility with a maturity of not more than a year. Only documents evidencing debts arising from bona fide commercial transactions can be traded.
Bai al Salam: This term refers to advance payment for goods which are to be delivered later.Normally, no sale can be effected unless the goods are in existence at the time of the bargain.But this type of sale forms an exception to the general rule provided the goods are defined and the date of delivery is fixed. The objects of this type of sale are mainly tangible things but exclude gold or silver as these are regarded as monetary values. One of the conditions of this type of contract is advance payment.
Bai Bithaman Ajil: This contract refers to the sale of goods on a deferred payment basis.Equipment or goods requested by the client are bought by the bank which subsequently sells the goods to the client an agreed price which includes the bank's mark-up (profit).The client may be allowed to settle payment by installments within a pre-agreed period, or in a lump sum. Similar to a Murabaha contract, but with payment on a deferred basis.
Baitul Mal: Treasury.
Bai Muajjal (Deferred Payment Contract): A contract involving the sale of goods on a deferred
payment basis. The bank or provider of capital buys the goods (assets) on behalf of the business
owner. The bank then sells the goods to the client at an agreed price, which will include a markup
since the bank needs to make a profit. The business owner can pay the total balance at an agreed future date or make installments over a pre-agreed period. This is similar to a Murabaha
contract since it is also a credit sale.
Dirham: Name of a unit of currency, usually a silver coin, used in the past in several Muslim countries and still used in some Muslim countries, such as Morocco and United Arab Emirates.
Fatwah: A religious decree.
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