azerbaijan: emerging market islamic banking and finance

NEWHORIZON Shawwal–Dhu Al Hijjah 1429
IIBI WORKSHOP
and ijara, whereas salam (not currently used
by either DIB or EIB) may also be used in
the future.
Afterwards, Dr Dar provided an overview
of structures used in Islamic credit cards,
such as widely used bai al-ina (mainly in
Malaysian market) and tawaruq (GCC and
other markets apart from Malaysia). He
also explained some other less common
structures of ujrah (fee), ijara (leasing),
murabaha (cost plus mark-up), and a
combination of wakala (agency) and kafala
is a savings product offered by National
Bond Corporation, UAE, in which depositors
act as investors and place their money
with the manager (mudarib), NBC; profitsharing
ratio is defined from the outset.
Mudarib may, at its sole discretion, offer part
of its earned profit to the capital providers/
sukuk holders (arbub-al-maal) in the form of
prizes based on a draw system. He outlined
the comparison between premium bonds in
the UK and Wataniyya sukuk, and commented
on the commercial and Shari’ah related
issues in this type of structure.
various underlying contracts in Islamic
mortgage products will impact on a bank’s
balance sheet, cost of financing and other
rights such as securitisation of receivables
and therefore must be considered at the
start of product development.
Then, Sherwani outlined the recent
controversies in sukuk structuring from
the Shari’ah perceptive. These included
ownership in underlying assets of sukuk and
purchase undertaking by obligor to sukuk
holders in Islamic bonds with underlying
Cambridge workshop participants
(guarantee). Dr Dar also proposed an
innovative structure of a credit card based
on the contract of istijrar (purchasing
goods on ongoing basis without explicit
offer/acceptance each time).
In the next session, he discussed innovations
in Islamic depository/savings schemes with
an example of Wataniyya sukuk with a view
to seeking implications for further product
development of this kind. Wataniyya sukuk
In the ensuing session, Rahim elaborated on
the Shari’ah and legal issues in structuring
Islamic mortgages, which included ownership
transfer and law of the land in the context of
the UAE, Malaysia and the UK, and stamp
duty treatment for Islamic mortgages from
the UK market perspective. She explained
various models used for Shari’ah-compliant
mortgages, such as bai bithamin ajil (also
referred to as bai mu’ajal), ijara, diminishing
musharakah and istisna. She concluded that
contracts of mudarabah, wakala and
musharakah (which is tantamount to capital
protection or guarantee). Profit distribution
mechanism between a special purpose
vehicle (SPV) issuing sukuk and the sukuk
holders, the liquidity facility of the obligor
and the incentive payment to the manager
were also discussed by Sherwani. He
proposed a number of remedies, particularly
in the filed of structuring mudarabah and
musharakah sukuk.
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