The International Islamic Financial Markets Conference
May 16th, 2005
Kingdom of Bahrain
Sokouk Al
-Intifa’a
Al-Intifa’a
Islamic Money Market
Instrument
By:
-Homoud
By: Fuad
Fuad Hamed
Hamed Al
Al-Homoud
Munshaat
Munshaat Real
Real Estate
Estate Projects
Projects Company
Company
1
Table of Contents
1.
2.
3.
4.
5.
6.
7.
8.
Presentation Approach
Introduction - What is Sokouk
Sokouk Vs. Bond
Types of Sokouk
a. Non Tradable Sokouk
b. Tradable Sokouk
Sokouk Al-Ijara
a. Definition
b. Characteristics
c. Types of Sokouk Al-Ijara
Sokouk Al-Intifa’a
a. Definition
b. Features
c. Economic Value
d. Sokouk Al-Intifa’a as a Tradable Instrument
Application
Conclusion
2
2
Presentation Approach
Sokouk
Sokouk
Al
-Ijara
Al-Ijara
Sokouk
Al
-Intifa’a
Al-Intifa’a
Tradable
Instrument
Application
3
3
Introduction
Conventional
Financial Market
Single
Debt
Based
Single
DebtCategory
Category
Based
Instrument
–– Multiple
Instrument
Multiple
Structures
Structures
BOND
BOND
Islamic
Financial Market
Sokouk
Sokouk
Asset
Asset Based
Based
Focus
Multi
Diversified
-Billon
of
Focus
Multi-Billon
Diversified
of the
the
Instrument
Instrument
Global
Dollars
categories
financial
Market
Global
Dollars
categories
financial
Market
(Asset
–– Right
of
(Asset
Right
of
Market
Market
Use)
Use)
4
4
Sokouk
The Islamic Bond
Investment Certificates representing a pro-rata share in
a Portfolio of Investment.
The Performance of Sokouk is a reflection of the
performance of the portfolio.
Issuance of Sokouk represents a purchase of a share in an
income producing investment.
5
5
Sokouk Vs Bond
Ownership instrument Vs Debt instrument
Investment instrument Vs Financial
Financinginstrument
instrument
Profit & Loss instrument
No Money Back Guarantee
Duration is not necessarily Limited
Ownership Consequences
Business Activities in compliance with Islamic Sharia’a
6
6
Types of Sokouk
Sokouk
Sokouk
Non
Non
Tradable
Tradable
Debt Portfolio
Tradable
Tradable
- Asset Based
- Semi Asset Based
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7
Types of Sokouk
Sokouk
Sokouk
Non
Non
Tradable
Tradable
Morabaha
Tradable
Tradable
Salam
Istisna
Musharaka
Mudaraba
Ijara
8
8
Sokouk Al-Ijara
Definition
A Financial Instrument structured to represent a Pro
-rata share in
Pro-rata
a pool of cash flow generating assets
assets.. Such share ( Sokouk ) can be
transferred to investors by means of ownership either with or
without the support of further collaterals
collaterals..
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9
Sokouk Al-Ijara
Characteristics
Securitization of Leases
Effective Fund Raising
Secondary Market Tool
Tradable
Short Term Liquidity Instrument
Effective Asset / Liability Management Tool
10
10
Types of Sokouk Al-Ijara
Sokouk
Sokouk
Al
-Ijara
Al-Ijara
Asset
Asset
Backed
Backed
Lease
Lease Hold
Hold
Ownership Entitlement
Usufruct Entitlement
Sokouk Al
-Intifa’a
Al-Intifa’a
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11
Sokouk Al-Intifa’a
A Derivative of Lease / Forward Lease
B.O.T. Entitlement
Disintegration of Real Estate Elements ( Commoditization )
Hotel / Hospitality Industry
12
12
Sokouk Al-Intifa’a
Definition
Sokouk Al-Intifa’a is a Certificate or Deed that entitles its holder
the right to utilize a specific real estate property for a specific
duration of time per year over a determined number of years. This
right is wholly owned by the Sokouk holder who is entitled to either
sell, grant, inherit or invest the Sokouk.
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13
Sokouk Al-Intifa’a
Features
Representation of Strategic Projects / Assets
Representation of B.O.T. Projects
Long Term Leasehold Instrument
Mobilization of Funds / Assets
Effective Money Market Instrument
14
14
Sokouk Al-Intifa’a
Economical Value
(Hospitality Industry in Makkah)
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Economical
Value
Value
Value
Improvement
Improvement
Factors
Factors
Market
Market
Inflation
Inflation
Increase
Increase in
in
Rooms
Rooms Rate
Rate
Increasing
Increasing
Rooms
Rooms Demand
Demand
Shortage
Shortage in
in
Rooms
Rooms Supply
Supply
15
15
Sokouk Al-Intifa’a
A Tradable Instrument
Sokouk
-Intifa’a
Sokouk Al
Al-Intifa’a
is
is aa Tradable
Tradable
Instrument
Instrument
Transferable
Transferable
Value
Value
Sokouk
Sokouk
Al
-Intifa’a
Al-Intifa’a
Transfer
Transfer to
to new
new Investors
Investors
Produces
Produces aa set
set of
of Cash
Cash Flow
Flow
Sokouk
-Rata Share
Sokouk As
As Pro
Pro-Rata
Share of
of Usufruct
Usufruct
Disintegration
Disintegration of
of Leased
Leased Assets
Assets
16
16
Application
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
1
SPC
Sublease
Issuance of Sokouk
Market
Maker
Purchase of
Lease Rights
Advance
Rental
Zamzam
Zamzam
Tower
Tower
Sublease
4
Liquidity
Receiver
Ad
va
Re nce 2
nta
l
5
6
Liquidity
Provider
ed
r
r
fe
De ntal
Re
Sublease 3
Sublease
17
17 flow
Cash
Application
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
Sokouk
1
SPC
Sublease
Issuance of Sokouk
Market
Maker
Purchase of
Lease Rights
1
- Income
1Income from
from Sokouk
Sokouk Operation
Operation
2
- Income
2Income from
from Treasury
Treasury Transaction
Transaction
Zamzam
Zamzam
Tower
Tower
Advance
Rental
4
Sublease
Company Income Profile
Liquidity
Receiver
Ad
va
Re nce 2
nta
l
5
6
Liquidity
Provider
ed
r
r
fe
De ntal
Re
Sublease 3
Sublease
18
18 flow
Cash
Conclusion
React to market trend.
Take initiative.
Expand product range.
Build regional infrastructure.
Capitalize on available resources.
Establish centralized satellite center.
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19
‫‪Thank You‬‬
‫‪Sokouk Al‬‬
‫‪-Intifa’a‬‬
‫‪Al-Intifa’a‬‬
‫‪Islamic Money Market‬‬
‫‪Instrument‬‬
‫راﺷﺪ‬
‫ﺑﻦ راﺷﺪ‬
‫ﻣﺤﻤﺪ ﺑﻦ‬
‫اﻟﺸﻴﺦ ﻣﺤﻤﺪ‬
‫ﺟﺎﺋﺰة اﻟﺸﻴﺦ‬
‫ﺟﺎﺋﺰة‬
‫اﻹﺳﻼﻣﻴﺔ‬
‫اﻟﻤﺎﻟﻴﺔ اﻹﺳﻼﻣﻴﺔ‬
‫اﻷدوات اﻟﻤﺎﻟﻴﺔ‬
‫ﻓﻲ اﻷدوات‬
‫ﻟﻼﺑﺘﻜﺎر ﻓﻲ‬
‫ﻟﻼﺑﺘﻜﺎر‬
‫‪2005‬‬
‫ﻣﺎرس ‪2005‬‬
‫ﻣﺎرس‬
‫‪20‬‬
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