Raising Finance via Murabahah Sukuk
A murabahah bond is a security whose holder is deemed as the owner
of a financial asset (liability) which has been obtained according murabahah contact,
and the holder of the bond is the owner and creditor of such liability. Such
bonds earn fixed return and may be transacted in the secondary markets.
In case a company intends to make purchase of materials and goods
of consuming mature, it cannot make use lease bonds, but it can purchase the
same by financing via murabahah bonds. The issuer may use murabahah bonds both
as a fixed asset and as working capital, e.g., purchase of raw materials,
equipment and consuming materials. Easy supply of great financial resources is
another important privilege of issuing murabahah bonds for the issuer.
Each Special Purpose Vehicle (SPV) in private,
cooperative or governmental sector qualifying for issuing such bonds may
proceed with issuing such bonds for financing the required financial resources.
The life period of such bonds ranges from 2 to 5
Only fixed payments are made to the holders of
bonds as profit at specified intervals during the validity period of such
Principal liability will be repaid lump sum to
the holders of bonds at the end of period. It is obvious the bonds earn no profit
upon their expiration.
Payment of installments of the asset price is
made quarterly or biannually, without grace period.
Holders are entitled to proceed with selling and
redemption of their bonds prior to expiration of such bonds.
Types of Murabahah Bonds
Varying types of murabahah bonds has been proposed and some have
been implemented; the most important ones are as follows:
Financing Murabahah Bonds: In this kind of
murabahah, an intermediary collects funds from the financial investors (people)
and purchases in cash the goods required by the SPV from the producer (vendor)
on behalf of the mentioned investors and then sells the goods to the SPV at a
higher price on murabahah-credit-selling-basis. SPV undertakes to pay the
on-account price of the goods to holders of bonds at a specified maturity. The
holders can wait until maturity and earn the murabahah profit, or otherwise
they can sell their bonds at a secondary market prior to their maturity.
Liquidity Financing Murabahah Bonds: In
this method, the bonds-issuing institute makes purchase of the assets of the government,
organizations and economic institutions in cash, then, sells them such assets at
a higher price and on time on-account basis, and return, receives financial
instruments at specified amounts and maturities from them. The legal relations
in the second type murabahah bonds is almost the same as those in the first
type; the difference is that in this type, the intermediary institute purchases
in cash the asset from the SPV; then, he sells the same asset to SPV at a
higher price, on-account basis.
Trading Companies Capital Formation Murabahah
Bonds: In this kind of murabahah bond, the objective is capital formation and continuing
trading activity. The Special Purpose Vehicle (SPV) (Trading Company) which
also plays the roles of the issuer, collects surplus cash funds from persons,
and on behalf of them, makes purchase in cash of goods required by the
government, governmental organizations, government-affiliated companies and
economic entities of private sector and consumers from the producers and sale
centers; then, by sells the goods to the final consumers on-account basis by
adding a fixed rate as profit. The profit resulting out of transaction
operations is distributed among the holders of bonds, whether quarterly or
annually after deduction a percentage as the fee due to the issuer (trading
company). The third type of murabahah bond bears the nature of companies’ shares
and it may be issued without a defined maturity. Further, it may be defined
with a maturity, but convertible to share certificates from the beginning.
Mortgage Murabahah Bonds: An important
application of murabahah bonds is conversion of facilities from banks and
leasing companies into the share certificates. In this method, the SPV (bank or
leasing company) which assigned the assets to the government, entities and
households through mortgage murabahah (sales by installment) may liquidate his
resources by conversion of receivables due to murabahah facilities into securities.
To this end, the intermediary collects funds from investors by issuing
murabahah bonds, then, purchases the debts due to murabahah facilities at
discount rate from the SPV (bank or leasing company) on behalf of such
investors, and the SPV undertakes to collect the debts at the their nominal
value at specified maturities and remit the same to the holder of bonds. The
holders of bonds may either wait until maturity and enjoy the final profit
earned accrued to the bonds, or otherwise sell their respective bonds at the
secondary market at a lower interest.