1.0 SUKUK BAY BITHAMAN AJIL(BBA)
1.1 INTRODUCTION According to Ghani (2003) Sukuk BBA is a Arabic word that means financial certificate based on Bai Bithaman Ajil Contract that prove the ownership right of investor to the determining assets. Sukuk BBA is not a bond because bond shown the debt. But Sukuk BBA is an obligation that shown the financial f inancial obligation obligation as a receivable paper. In classical period Islam Sakk (sukuk) – which is cognate with the European root “cheque” (which itself derives from Persian)- meant any document representing a
contract or conveyance of rights, obligations or monies done in conformity with the Shariah. Empirical evidence shows that sukuk were a product extensively used during medieval Islam for the transferring of financial f inancial obligations obligations originating from trade and other commercial activities. The essence of sukuk, in the modern Islamic perspective, lies in the concept of asset monetisation – the so called securitisation – that is achieved through the process of issuance of sukuk (taskeek). Its great potential is in transforming an asset’s future cash flow into present cash flow. Sukuk may be issued on existing as well as specific assets that may become available at a future date.
1.2 The Purpose Of Sukuk BBA Creation The purpose of sukuk creation is to change the conventional obligation that using fixed interest rate that be forbidden by Islamic Law so Islamic Economic can be develop without mixing Riba variable. Sukuk BBA created to service the needed of working capital , or to re-finance existing debt, or use in the transportation sector (especially in the shipping and aircraft sectors), real estate, construction and petrochemical projects in several countries.
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1.3 Creating Proses of Sukuk BBA The Creating Proses of Sukuk BBA is upon an accelerated Murabaha principal plus the profit payment from the obligor, the Certificate/Sukuk Holders receive the remaining sukuk principal and any accrued coupon. For example : The issuer will sale the basic assets to the investor with cash pricing fo example RM 10,000. and then buy back again with credit way amount to RM 1000. Its means the issuer has debt to the investor amount to RM.11,000. And for approving that debt, the issuer will issue Sukuk BBA to the investor.
1.4 Sukuk BBA Salient Features One of the Salient Features of Sukuk BBA is almost all the people doing the Bai Bithaman Ajil activities in every transaction nowadays. So its very good situation that can be supporting of Sukuk BBA issuing. So Sukuk BBA become very interesting obligation that interesting society. Actually, asset securitization represents a cost-efficient and flexible structured finance technique of liquidity transformation and risk transfer, which converts present or future asset claims of varying maturity and quality into tradable debt securities. The various methods of securitization have much to offer, but so far they have found only limited acceptance in Islamic finance due to religious restrictions on the sale and purchase of interest-bearing debt and legal uncertainty surrounding the enforceability of investor interest under Islamic jurisprudence. Over the last five years, the nascent Islamic securitization market has seen many positive developments owing to the adoption of enabling capital market regulations, a favorable macroeconomic environment, and financial innovation aimed at establishing shariah compliance. The other salient of Sukuk BBA is in selling cases where payment of price is deferred final price should be contractually agreed and known to both parties time and mode of payment should be ascertained no need to state the cost price and amount of mark-up (if disclosed also a murabahah).
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1.5 Parties to the Sukuk BBA Instruments Many parties of Sukuk BBA and One of them is Wakaf transaction in Malaysia, Trading Transaction etc. As most Islamic bonds issued by companies today have been heavily structured using bay’ al-inah and bay’ al-dayn contracts and therefore less acceptable to some
Middle-eastern investors, it can further frustrate attempts to attract the much need capital inflows especially middle eastern capital into the country when western sources are drying. It is therefore imperative to understand the underlying process of Islamic bond issuance in Malaysia, and to what extent it is not in line with the thinking of Middle-eastern jurists. It is urgent to find out the necessary steps taken by Malaysian companies to do away with these controversies so that they can source the much needed capital from the Middle-eastern investors.
1.6 Obligation of Each Parties of Sukuk BBA Murabahah/BBA sukuk are just tradable in Malaysian domestic market or perhaps some regional markets that adopt the Malaysian fatwa on bay` al `inah and bay` al dayn .Its not suitable for global / GCC market. The obligation of each parties always based on the Ba’I Bithaman Ajil contract.
1.7 Right of Each Parties of Sukuk BBA In Sukuk BBA, the Issuer of Sukuk have right to get fund from the Investor, meanwhile the investor have right to sale again that sukuk to another one to get the fund again with the profit addition . If real value of Sukuk BBA is not suitable with the contract before so the investors have right to complaint and return back it to the issuer.
1.71 Cost of Creating the Instruments to the Issuer The cost of creating the instrument to the issuer is depend on the value of that Sukuk BBA its self. And its become the responsibility of the issuer. In this case, the cost of it consist of the launching cost at the primary market, promotion cost, distribution cost and so on.
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1.72 Cost of Holding the Instrument to the Subscriber The cost of Holding the instrument to the subscriber is being responsibility of the issuer of Sukuk BBA. The cost of it is depend on the amount of the sukuk. In reality, the cost is very relative according to negotiation between the issuer and the investor.
1.73 The Risk and Return to The Subcriber The risk of buying of Sukuk BBA for the subscriber is the changing the real price of the Sukuk BBA in the Secondary Market. If the sales price of the Sukuk BBA in the secondary market is lower than the purchasing price it self of course it the loose will be the responsibility of the subriber. The return of Sukuk BBA for the subscriber come from the the earning of sales back in secondary market. In this case the total of return is the price of each Sukuk BBA times to the quantity of sales in secondary market. And the profit will be created when the price of purchasing back of that sukuk in secondary market is higher than the purchasing price before.
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The Other Cost Element of Sukuk BBA
The other cost element of Sukuk BBA is the opportunity cost while the subscriber do not sale the Sukuk BBA in the good price at secondary market. And cost else for the issuer is the risk cost while the total of sales is not suitable as the target.
1.8 The Instrument and Process of Sukuk BBA Traded in Financial Market. The instrument of the Sukuk BBA in Financial Market are: (1) The Issuer (2) ) Investor (3) ) Government Institution securities (4) The project offered.
The process of Trading Sukuk BBA in Financial Market are : 1st : The issuer regist the Sukuk BBA to the Government Securities Institution 2nd : The issuer make the prospectus of the project offered and publicized in news paper and Primary Market. 4
3rd : The issuer of Sukuk BBA doing promotion and sales activities in the Primary Market 4th : The investor doing buying activities in the Primary Market. 5th : The investor will sale back the Sukuk BBA in the Secondary Market.
1.9 The Secondary Market of Sukuk BBA The Secondary Market of Sukuk BBA in determined institution that be place to doing sales and buy securities activities, for example in Indonesia there are Bursa Securities Jakarta, Bursa Securities Surabaya and so on.
1.91 The Pricing Mechanism of Sukuk BBA The Pricing Mechanism of Sukuk BBA is : 1st :Determining the total cost of the project that will be financed by the Sukuk BBA. 2nd :Determining the total revenue that will be reached. 3rd :Determining the Cost of Goods Sales per one obligation 4th : Determining the profit that will be reached per one obligation 5th : Determining the Sales Price of Sukuk BBA by adding the Cost of Goods Sales with the profit per one Sukuk BBA obligation. 6th : Register that Sukuk BBA to the Government Securities Institution with the Primary Market Price
1.92 The Official Guidelines For Sukuk BBA Establishment The official guidelines for Sukuk BBA establishment is issued by the government Islamic securities institution , syariah institution and central bank in every country. For example in Malaysia there is the Kuala Lumpur Automated Clearing House as one of Islamic government institution that produced the guidelines for Islamic securities. The guidelines consist of the regulations of the Sukuk BBA sales for example :the profit determined not more than 10% per each bond, The issuer must make the real prospectus of the project that will be financed by Sukuk BBA.etc.
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2.0 SUKUK MURABAHAH Murabaha is a form of sale where the cost of the goods to be sold as well as the profit on the sale is known to both parties. The purchase and selling price and the profit margin must be clearly stated at the time of the sale agreement. Payment of the Murabaha price may be in spot, in instalments or in lump sum after a certain period of time.
Murabaha has been adopted as a mode of interest-free financing by a large number of Islamic banks to finance the purchase of the consumer goods, intermediary or capital goods, real estate, raw materials, machinery and equipment. It may also be used for trade financing needs such as import of goods or pre-shipment export finance. However, the subject of Murabaha must exist and be in the ownership of the bank at the time of sale in a physical or constructive possession form; and these assets must be something of value that is classified as property in Islamic jurisprudence and must not be forbidden commodities. Debt instruments and monetary units that are subject to the rules of Bai´ al Sarf cannot be sold through Murabaha.
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