Iranian Sukuk securities; the practical issuance flowchart!
Islamic bonds, structured in such a way as to generate returns to investors without infringing Islamic law (that prohibits riba or interest).
Sukuk securities represent undivided shares in the ownership of tangible assets relating to particular projects or special investment activity. A Sukuk investor has a common share in the ownership of the assets linked to the investment although this does not represent a debt owed to the issuer of the bond.
Comprehensive Sukuk study resources, with structure diagrams, detailed overview of structures, key features of the underlying structure, required documentation, related structures and market developments can be found here.
Iran was the first nation to consider Islamic financing and the law of Musharakah securities issuance passed by the Iranian parliament in September 1997. However, credit for the development should be given to other Islamic nations like Malaysia and Saudi Arabia. Ratification of a brand new capital market Act in November 2005 followed which provided a foundation for Islamic finance instruments to develop further. Other bylaws focusing on specific securities like Sukuk Ijarah, Murabahah and Istisnah also went into action gradually followed by the ratification of the Law for Development of New Financial Instruments and Institutions in 2009.
The below flowchart is to demonstrate the practical steps need to be taken for issuance of Iranian Sukuk securities on Iran’s capital market.
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