Mansoor Danish – Ep 3 Sukuk – The Islamic Bonds
AI: Summary ©
The speaker introduces a new product called "naive product" that is a Sharia compliant in nature bond. The product is designed to allow small businesses to raise money on a government-imposed highway and use it to fund projects such as roads and infrastructure. The return of the bonds is dependent on the performance of the project and the issuance of special purpose instruments. The product will be available until the end of the maturity period and generate cash for the government through the use of the scope.
AI: Summary ©
Sam Allahu Allahu Allahu wa barakato Welcome back to the world of Islamic finance, and we will continue to discuss today about the innovative products that we had mentioned in the last episode. In today's episode we introduce sukuks or Islamic bonds. Unlike traditional bonds sokoke, a Sharia compliant in nature, thereby making it appealing not only to the Islamic investors, but also conventional investors who may be interested in ethical returns. By definition, sukuks represent ownership in an underlying acid tangible asset or a project. This aspect of suku is what makes it different from conventional bond where you get fixed returns you get interest on your bonds. So
cukes returns are not fixed, but rather it is dependent upon the performance of the underlying tangible asset or the project for which the money has been raised. Now, this aspect of sokoke makes it Sharia compliant because there is no concept of rebar here. This term complete prohibition of rebar in Islamic finance, and sokoke regards that respects that principle, and does away with the concept of fixed interest bearing bonds. In fact, the issuances of sokoke have gained popularity to the extent that not only are corporates using the mode of spooks to raise fund, but even government are using sovereign sokoke to raise money for their needs. Let me give you an example. Let's say if
a government wishes to build a new highway, and it needs money, it will not go and visit another bank to raise money, it's not going to go and take interest based loans, but rather it will use the sokoke mode. What it will do is that it will identify a project which needs to be financed, let's say they want to build a highway. So once they have identified the project, they create an SPV special purpose vehicle for the purpose of the issuance of the scope and monitoring the issuance of the scope and the project. And after that, they are going to go ahead with the project that is the highway that needs to be built. And they will issue certificates, investors are going to come
forward and buy the certificates. The return of these bond holders or school holders will be dependent upon the performance of the project. Now once the highway is ready, it's going to create money for the government through the usage through the tools that will be put over there. And this money will be shared with the stockholders as they return. And this will continue till the life of the sokoke. Now once the maturity time comes, the government will start buying back the scope at its face value. And thus, they redeem the scope from the market. So that's how convenient scope can be and Sharia compliant as well. We've just introduced the concept of scope to all of you. There is a
lot more to study about Islamic finance, and we hope to get into details as we move on. Please remember to like this video, share this video, and remember to subscribe to our channel. If you like this video, please share your thoughts with us in the comment section. If you would like us to make a video on any specific topic on Islamic banking and finance. Please share your thoughts as well in the comment section. Thank you for watching this video. I'll see you in the next episode with another product, another investment product which will be equally exciting and equally beneficial for all of yours learning and understanding. Thank you so much.