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Sokouk Al-Intifa’a
Islamic Money Market Instrument
Sokouk AlSokouk Al--IntifaIntifa’’a a
Islamic Money Market Islamic Money Market Instrument Instrument
By: Fuad Hamed Al-Homoud
Munshaat Real Estate Projects Company
By: Fuad By: Fuad HamedHamed AlAl--HomoudHomoud
Munshaat Real Estate Projects CompanyMunshaat Real Estate Projects Company
The International Islamic Financial Markets ConferenceThe International Islamic Financial Markets ConferenceMay 16May 16thth, 2005, 2005
Kingdom of BahrainKingdom of Bahrain
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TableTable of Contentsof Contents
1.1. Presentation Approach Presentation Approach 2.2. Introduction Introduction -- What is Sokouk What is Sokouk 3.3. Sokouk Vs. Bond Sokouk Vs. Bond 4.4. Types of Sokouk Types of Sokouk
a.a. Non Tradable SokoukNon Tradable Sokoukb.b. Tradable SokoukTradable Sokouk
5.5. Sokouk AlSokouk Al--IjaraIjaraa.a. Definition Definition b.b. Characteristics Characteristics c.c. Types of Sokouk AlTypes of Sokouk Al--IjaraIjara
6.6. Sokouk AlSokouk Al--IntifaIntifa’’aaa.a. Definition Definition b.b. Features Features c.c. Economic ValueEconomic Valued.d. Sokouk AlSokouk Al--IntifaIntifa’’aa as a Tradable Instrument as a Tradable Instrument
7.7. ApplicationApplication8.8. ConclusionConclusion
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SokoukSokoukSokouk SokoukAl-IjaraSokoukSokoukAlAl--IjaraIjara
SokoukAl-Intifa’a
SokoukSokoukAlAl--IntifaIntifa’’aa
Presentation ApproachPresentation Approach
Tradable InstrumentTradable Tradable
InstrumentInstrument
ApplicationApplicationApplication
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Single Category – Multiple Structures
Single Category Single Category –– Multiple Multiple StructuresStructures
IntroductionIntroduction
IslamicFinancial Market
IslamicIslamicFinancial MarketFinancial Market
ConventionalFinancial Market
ConventionalConventionalFinancial MarketFinancial Market
SokoukSokoukSokoukBONDBONDBONDFocus of the
Global financial Market
Focus of the Focus of the Global financial Global financial
MarketMarket
Multi-Billon Dollars Market
MultiMulti--Billon Billon Dollars MarketDollars Market
Diversified categoriesDiversified Diversified categoriescategories
Asset Based Instrument
(Asset – Right of Use)
Asset Based Asset Based Instrument Instrument
(Asset (Asset –– Right of Right of Use)Use)
Debt Based InstrumentDebt Based Debt Based InstrumentInstrument
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Investment Certificates representing a proInvestment Certificates representing a pro--rata share in rata share in
a Portfolio of Investment.a Portfolio of Investment.
The Performance of Sokouk is a reflection of the The Performance of Sokouk is a reflection of the
performance of the portfolio. performance of the portfolio.
Issuance of Sokouk represents a purchase of a share Issuance of Sokouk represents a purchase of a share in an in an
income producing investment. income producing investment.
Investment Certificates representing Investment Certificates representing aa propro--ratarata share in share in
a Portfolio of Investment.a Portfolio of Investment.
The Performance of Sokouk is a The Performance of Sokouk is a reflectionreflection of the of the
performance of the portfolio. performance of the portfolio.
Issuance of Sokouk represents a Issuance of Sokouk represents a purchase of a sharepurchase of a share in an in an
income producing investment. income producing investment.
Sokouk Sokouk The Islamic BondThe Islamic Bond
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Ownership instrument Vs Debt instrument Ownership instrument Vs Debt instrument
Investment instrument Vs Financial instrument Investment instrument Vs Financial instrument
Profit & Loss instrument Profit & Loss instrument
No Money Back Guarantee No Money Back Guarantee
Duration is not necessarily Limited Duration is not necessarily Limited
Ownership Consequences Ownership Consequences
Business Activities in compliance with Islamic ShariaBusiness Activities in compliance with Islamic Sharia’’aa
Sokouk Vs BondSokouk Vs Bond
Ownership instrument Vs Debt instrument Ownership instrument Vs Debt instrument
Investment instrument Vs Financing instrument Investment instrument Vs Financing instrument
Profit & Loss instrument Profit & Loss instrument
No Money Back Guarantee No Money Back Guarantee
Duration is not necessarily Limited Duration is not necessarily Limited
Ownership Consequences Ownership Consequences
Business Activities in compliance with Islamic ShariaBusiness Activities in compliance with Islamic Sharia’’aa
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Types of SokoukTypes of Sokouk
SokoukSokoukSokouk
TradableTradableTradableNon Tradable
Non Non TradableTradable
Debt PortfolioDebt Portfolio -- Asset BasedAsset Based-- Semi Asset BasedSemi Asset Based
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Types of SokoukTypes of Sokouk
SokoukSokoukSokouk
TradableTradableTradableNon Tradable
Non Non TradableTradable
MorabahaMorabahaMorabaha SalamSalamSalam
IstisnaIstisnaIstisna
MusharakaMusharakaMusharaka IjaraIjaraIjara
MudarabaMudarabaMudaraba
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A Financial Instrument structured to represent a Pro-rata share in
a pool of cash flow generating assets. Such share ( Sokouk ) can be
transferred to investors by means of ownership either with or
without the support of further collaterals.
A A Financial InstrumentFinancial Instrument structured to represent a structured to represent a ProPro--rata sharerata share in in
a pool of a pool of cash flow generating assetscash flow generating assets. Such share ( Sokouk ) can be . Such share ( Sokouk ) can be
transferred to investorstransferred to investors by means of ownership either by means of ownership either with or with or
withoutwithout the support of further the support of further collateralscollaterals..
Sokouk AlSokouk Al--IjaraIjaraDefinitionDefinition
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Sokouk AlSokouk Al--IjaraIjaraCharacteristics Characteristics
Securitization of Leases Securitization of Leases
Effective Fund Raising Effective Fund Raising
Secondary Market ToolSecondary Market Tool
TradableTradable
Short Term Liquidity Instrument Short Term Liquidity Instrument
Effective Asset / Liability Management ToolEffective Asset / Liability Management Tool
Securitization of Leases Securitization of Leases
Effective Fund Raising Effective Fund Raising
Secondary Market ToolSecondary Market Tool
TradableTradable
Short Term Liquidity Instrument Short Term Liquidity Instrument
Effective Asset / Liability Management ToolEffective Asset / Liability Management Tool
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Types of Sokouk AlTypes of Sokouk Al--IjaraIjara
Sokouk Al-Ijara
Sokouk Sokouk AlAl--IjaraIjara
Lease HoldLease HoldLease HoldAsset Backed
Asset Asset BackedBacked
Ownership EntitlementOwnership EntitlementOwnership Entitlement Usufruct Entitlement Usufruct Entitlement Usufruct Entitlement
Sokouk Al-Intifa’aSokouk AlSokouk Al--IntifaIntifa’’aa
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A Derivative of Lease / Forward Lease
B.O.T. Entitlement
Disintegration of Real Estate Elements ( Commoditization )
Hotel / Hospitality Industry
A Derivative of Lease / Forward Lease A Derivative of Lease / Forward Lease
B.O.T. Entitlement B.O.T. Entitlement
Disintegration of Real Estate Elements ( Commoditization )Disintegration of Real Estate Elements ( Commoditization )
Hotel / Hospitality IndustryHotel / Hospitality Industry
A Derivative of Lease / Forward Lease
B.O.T. Entitlement
Disintegration of Real Estate Elements ( Commoditization )
Hotel / Hospitality Industry
A Derivative of Lease / Forward Lease A Derivative of Lease / Forward Lease
B.O.T. Entitlement B.O.T. Entitlement
Disintegration of Real Estate Elements ( Commoditization )Disintegration of Real Estate Elements ( Commoditization )
Hotel / Hospitality Industry Hotel / Hospitality Industry
Sokouk AlSokouk Al--IntifaIntifa’’a a
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Sokouk AlSokouk Al--IntifaIntifa’’a a Definition 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.
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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Sokouk AlSokouk Al--IntifaIntifa’’a a Features Features
Representation of Strategic Projects / Assets
Representation of B.O.T. Projects
Long Term Leasehold Instrument
Mobilization of Funds / Assets
Effective Money Market Instrument
Representation of Strategic Projects / AssetsRepresentation of Strategic Projects / Assets
Representation of B.O.T. Projects Representation of B.O.T. Projects
Long Term Leasehold Instrument Long Term Leasehold Instrument
Mobilization of Funds / Assets Mobilization of Funds / Assets
Effective Money Market InstrumentEffective Money Market Instrument
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Sokouk AlSokouk Al--IntifaIntifa’’a a Economical Value Economical Value
(Hospitality Industry in Makkah)(Hospitality Industry in Makkah)
Increasing Rooms Demand
Increasing Increasing Rooms DemandRooms Demand
Shortage in Rooms Supply
Shortage in Shortage in Rooms SupplyRooms Supply
Market InflationMarket Market
InflationInflation
Sokouk Economical
Value
Sokouk Sokouk Economical Economical
ValueValue
SokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokouk
SokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokoukSokouk
Increase in Rooms RateIncrease in Increase in
Rooms RateRooms Rate
Value Improvement
Factors
Value Value Improvement Improvement
FactorsFactors
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SokoukAl-Intifa’a
SokoukSokoukAlAl--IntifaIntifa’’aa
ValueValueValue
TransferableTransferableTransferable
Sokouk Al-Intifa’ais a TradableInstrument
Sokouk AlSokouk Al--IntifaIntifa’’aais a Tradableis a TradableInstrumentInstrument
Disintegration of Leased AssetsDisintegration of Leased AssetsDisintegration of Leased Assets
Sokouk As Pro-Rata Share of Usufruct Sokouk As ProSokouk As Pro--Rata Share of Usufruct Rata Share of Usufruct
Produces a set of Cash FlowProduces a set of Cash FlowProduces a set of Cash Flow
Transfer to new InvestorsTransfer to new InvestorsTransfer to new Investors
Sokouk AlSokouk Al--IntifaIntifa’’a a A Tradable Instrument A Tradable Instrument
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Zamzam Tower
Zamzam Tower
SPCSPCSPC
Market MakerMarket Market MakerMaker
Liquidity Liquidity ProviderProvider
Liquidity Liquidity ReceiverReceiver
SubleaseSublease
SubleaseSublease
SubleaseSublease
Advance
Advance R
entalR
ental
Advance
Advance RentalRental
Deferred
Deferred
RentalRental
SubleaseSublease
Cash flowCash flow
1
3
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2
6
SokoukSokoukSokoukSokoukSokoukSokouk
SokoukSokoukSokouk
Purchase of Purchase of Lease RightsLease Rights
Issuance of SokoukIssuance of Sokouk
ApplicationApplication
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Issuance of SokoukIssuance of Sokouk
Zamzam Tower
Zamzam Tower
SPCSPCSPC
Market MakerMarket Market MakerMaker
Liquidity Liquidity ProviderProvider
Liquidity Liquidity ReceiverReceiver
SubleaseSublease
SubleaseSublease
SubleaseSublease
Advance
Advance R
entalR
ental
Advance
Advance RentalRental
Deferred
Deferred
RentalRental
SubleaseSublease
Cash flowCash flow
1
3
45
2
6
SokoukSokoukSokoukSokoukSokoukSokouk
SokoukSokoukSokouk
Purchase of Purchase of Lease RightsLease Rights
ApplicationApplication
Company Income Profile
1- Income from Sokouk Operation
2- Income from Treasury Transaction
Company Income ProfileCompany Income Profile
11-- Income from Sokouk OperationIncome from Sokouk Operation
22-- Income from Treasury TransactionIncome from Treasury Transaction
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React to market trend.Take initiative.Expand product range.Build regional infrastructure.Capitalize on available resources.Establish centralized satellite center.
React to market trend.Take initiative.Expand product range.Build regional infrastructure.Capitalize on available resources.Establish centralized satellite center.
ConclusionConclusion
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Sokouk Al-Intifa’a
Islamic Money Market Instrument
Sokouk AlSokouk Al--IntifaIntifa’’a a
Islamic Money Market Islamic Money Market Instrument Instrument
Thank You Thank You Thank You
جائزة الشيخ محمد بن راشد
للابتكار في الأدوات المالية الإسلامية
2005مارس
جائزة الشيخ محمد بن راشد جائزة الشيخ محمد بن راشد
للابتكار في الأدوات المالية الإسلامية للابتكار في الأدوات المالية الإسلامية
20052005مارس مارس