CA-8.4.5

An eligible servicer cash advance facility, based on Qard, is an advance granted by the servicer to the SPV to ensure timely payment to the investors⁴⁶ — for instance, in cases of timing differences between collection and payments. However, it is a Shari'a requirement that such facilities remain essentially separate from the Sukuk undertaking and that this separation be properly documented. In the case of servicer cash advances, a risk weight of 50% is applied to such facilities.

⁴⁶ It is, however, not permissible for the manager of Sukuk, whether the manager acts as Mudarib (investment manager), or Shank (partner) or Wakil (agent) for investment, to undertake to offer loans to Sukuk holders when actual earnings fall short of expected earnings. It is permissible, however, to establish a reserve account for the purpose of covering such shortfalls to the extent possible, provided the same is mentioned in the prospectus. It is not objectionable to distribute expected earnings, on account, or to obtain project financing on account of the Sukuk holders.

CA-8.4.6

A Qard made to enhance earnings raises issues of Shari'a compliance and must be distinguished from credit enhancement by means of "excess spread", as described in Paragraph CA-8.2.24 and must be treated as under Paragraph CA-8.4.3A.