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What is sukuk and how to buy it?

Updated: 9/14/2023
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12y ago

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Sukuks are Islamic compliant bonds that use investor funds to finance capital projects. They are considered permitted since the returns are not interest based on the money lent but rather a portion of the profits or rent generated from the project that was financed. Most sukuks are offered by Islamic investment firms or some governments such as UAE. However, they are not as widely available to regular investors as conventional bonds.

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What are the advantages and disadvantages of Sukuk?

Sukuk have great potential for promoting risk sharing thereby increasing savings mobilization and investment, spurring growth leading to enhanced welfare. Sukuk is based on an underlying transaction which creates a close link between financial and productive flows. The financing must be channeled for productive purposes such as project financing, rather than for speculative activities. Thus, the risk exposure is to the project and not to the uncertainties or activities that have no real economic benefits. This contributes to greater stability of the financial system. Moreover, under the risk-sharing principle required, there is an explicit sharing of risk by the financier and the borrower. This arrangement will entail the appropriate due diligence and the integration of the risks associated with the real investment activity into the financial transaction. The real activity is expected to generate sufficient wealth to compensate for the risks. One of disadvantages is the lack of standardization.


What kind of services fall under structured solutions of banks?

Many banks offer structured solutions to their customers that are customized to their requirements. They provide advisory services and cost-effective financial solution to raise large sums of money. They offer syndicated transactions, Sukuk issuance, project finance, ECA-backed Transactions, Private Placement and Leverage Finance.


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Types of share buy backs include selective buy-backs, employee share scheme buy-back and the minimum holding buy-back.


Buy back of shares is a?

The buy back of shares is known as a share repurchase or a buy back.


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Related questions

What are the companies working in gulf region issuing sukuk?

Dubai Investment Group


What is the investmet sukuk in Islamic bank?

Sukuk, plural of صك Sakk, is the Arabic name for financial certificates that are the Islamic equivalent of bonds. However, fixed-income, interest-bearing bonds are not permissible in Islam. Hence, Sukuk are securities that comply with the Islamic law (Shariah) and its investment principles, which prohibit the charging or paying of interest. Financial assets that comply with the Islamic law can be classified in accordance with their tradability and non-tradability in the secondary markets.


What are the advantages and disadvantages of Sukuk?

Sukuk have great potential for promoting risk sharing thereby increasing savings mobilization and investment, spurring growth leading to enhanced welfare. Sukuk is based on an underlying transaction which creates a close link between financial and productive flows. The financing must be channeled for productive purposes such as project financing, rather than for speculative activities. Thus, the risk exposure is to the project and not to the uncertainties or activities that have no real economic benefits. This contributes to greater stability of the financial system. Moreover, under the risk-sharing principle required, there is an explicit sharing of risk by the financier and the borrower. This arrangement will entail the appropriate due diligence and the integration of the risks associated with the real investment activity into the financial transaction. The real activity is expected to generate sufficient wealth to compensate for the risks. One of disadvantages is the lack of standardization.


What kind of services fall under structured solutions of banks?

Many banks offer structured solutions to their customers that are customized to their requirements. They provide advisory services and cost-effective financial solution to raise large sums of money. They offer syndicated transactions, Sukuk issuance, project finance, ECA-backed Transactions, Private Placement and Leverage Finance.


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