Riba, Ijtihad and Shari`ah Provisions on Sukuk
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Transcript of Riba, Ijtihad and Shari`ah Provisions on Sukuk
Riba, IjtihadRiba, Ijtihad and and Shari`ahShari`ah Provisions on Provisions on SukukSukuk
Prof Abdullah SaeedProf Abdullah Saeed
University of MelbourneUniversity of Melbourne
AustraliaAustralia
What this Presentation What this Presentation is aboutis about
The tension that exists between three trends of The tension that exists between three trends of thought seen in the debates on Islamic finance thought seen in the debates on Islamic finance today with particular reference to today with particular reference to sukuk.sukuk.
Exploration of the issue through a closer look at Exploration of the issue through a closer look at one particular type of one particular type of sukuksukuk and the and the relationships involved. relationships involved.
Asking some fundamental questions about the Asking some fundamental questions about the limits of limits of ijtihad ijtihad as far as as far as sukuksukuk are concerned. are concerned.
What this Presentation What this Presentation is notis not
A history of the development of the idea of A history of the development of the idea of sukuksukuk and its contemporary forms and its contemporary forms
About the technical details of About the technical details of sukuksukuk and and how they are structuredhow they are structured
An evaluation of the performance of An evaluation of the performance of sukuksukuk
How far How far sukuksukuk have penetrated in the have penetrated in the global marketglobal market
SukukSukuk: Brief Oveview: Brief Oveview
Basic concept of Basic concept of sukuksukuk
OriginsOrigins
Key characteristicsKey characteristics
SukukSukuk vs bonds vs bonds
Trends in Islamic Financial Trends in Islamic Financial Thought re Thought re SukukSukuk
Trends: Continuum [I……..P……UP]Trends: Continuum [I……..P……UP]– Idealistic [I]Idealistic [I]– Pragmatic [P]Pragmatic [P]– Ultra-pragmatic [UP]Ultra-pragmatic [UP]
Mainstream thought re Mainstream thought re sukuksukuk– PragmaticPragmatic– Key characteristics of this pragmatismKey characteristics of this pragmatism
Relationship between Debates on Relationship between Debates on RibaRiba and those on and those on SukukSukuk
RibaRiba– IdealisticIdealistic– PragmaticPragmatic– Ultra-pragmaticUltra-pragmatic
Comparison between debates on Comparison between debates on ribariba and and on on sukuksukuk– ApproachesApproaches– Text vs contextText vs context– IjtihadIjtihad vs vs taqlidtaqlid
SukukSukuk and and FiqhFiqh
Conceptualisation of Conceptualisation of sukuksukuk based on based on fiqhfiqh principles and contractsprinciples and contracts
Key principles and contracts: overviewKey principles and contracts: overview
SukukSukuk: Types: Types
AAOIFI and its recognition of a range of AAOIFI and its recognition of a range of typestypes– Brief overviewBrief overview
Focus: Least controversial type ofFocus: Least controversial type of sukuk sukuk: : – SukukSukuk based on based on IjarahIjarah (SBI) (SBI)
Example: Example: SukukSukuk based on based on IjarahIjarah (SBI)(SBI)
How it is viewed by regulators, How it is viewed by regulators, practitioners and practitioners and Shari`ahShari`ah scholars scholars
Nature of the contract (Nature of the contract (fiqhfiqh) on which SBI ) on which SBI is basedis based
Key Relationships: 1Key Relationships: 1
Originator Originator Special Purpose Vehicle Special Purpose Vehicle (SPV) (SPV) Holders of Holders of SukukSukuk (HoS) (HoS)
OriginatorOriginator– Role and functionRole and function
Special Purpose VehicleSpecial Purpose Vehicle– Role and functionRole and function
Holders of Holders of SukukSukuk– Role and functionRole and function
Key Relationships: 2Key Relationships: 2
Relationship between the Originator and Relationship between the Originator and Special Purpose VehicleSpecial Purpose Vehicle– AssetsAssets– Duration and timeDuration and time– LeaseLease– Funds from Funds from sukuksukuk– Rental paymentsRental payments– Lease backLease back– TitleTitle
Key Relationships: 3Key Relationships: 3
Relationship between HoS and SPVRelationship between HoS and SPV– Nature of this relationshipNature of this relationship– Issuing Issuing sukuksukuk– Funds generated from the Funds generated from the sukuksukuk– Payments to HoSPayments to HoS
Relationship between HoS and OriginatorRelationship between HoS and Originator– Nature of the relationshipNature of the relationship
Basic Principles and Interpretation: Basic Principles and Interpretation: Unchangeable? -1Unchangeable? -1
To be emphasisedTo be emphasised– Assets: typeAssets: type– Ownership: type & degreeOwnership: type & degree– Contractual formContractual form– Key relationships: direct/indirectKey relationships: direct/indirect
Basic Principles and Interpretation: Basic Principles and Interpretation: Unchangeable? -2Unchangeable? -2
To be avoidedTo be avoidedRibaRiba– Idealistic definitionIdealistic definition– Pragmatic definitionPragmatic definition– Ultra pragmatic definitionUltra pragmatic definition
MaysirMaysir– Idealistic definitionIdealistic definition– Pragmatic definitionPragmatic definition– Ultra pragmatic definitionUltra pragmatic definition
GhararGharar– Idealistic definitionIdealistic definition– Pragmatic definitionPragmatic definition– Ultra pragmatic definitionUltra pragmatic definition
Principles and ImmutabilityPrinciples and Immutability
Text-based?Text-based?
Ijtihad/Ijtihad/Context based?Context based?
Degree of mutability and immutabilityDegree of mutability and immutability
Trend that is at the forefront todayTrend that is at the forefront today– Key thinkers & their argumentsKey thinkers & their arguments– Key practitioners & their argumentsKey practitioners & their arguments
Pragmatic AdjustmentsPragmatic Adjustments
Nature of ownership:Nature of ownership:– Originator-SPVOriginator-SPV– SPV-HoSSPV-HoS
SPV as an intermediarySPV as an intermediaryDegree of ownership of HoS in the Degree of ownership of HoS in the underlying assetsunderlying assetsPredetermination of the value of sale of Predetermination of the value of sale of assets back to the originator (from SPV)assets back to the originator (from SPV)Rate of return and interest rateRate of return and interest rate
ChallengesChallenges
Differentiation between ‘bonds’ and Differentiation between ‘bonds’ and sukuksukuk
Islamicity of the products offered and Islamicity of the products offered and degree of acceptabilitydegree of acceptability
Idealistic and ultra-pragmatic constraintsIdealistic and ultra-pragmatic constraints
Triumph of pragmatic trend?Triumph of pragmatic trend?
Limits of Limits of ijtihadijtihad??
Where to from here?Where to from here?