OFS-1.9.8
For the purpose of this Module, the Islamic or Shari'a compliance contracts or transactions must have the following meaning:
(a) Ijara Sukuk is issued on stand alone assets identified on the balance sheet. For this purpose, the assets identified can be land which is to be leased, or equipment (e.g. aircraft, ships) to be leased. The rental rates of returns on these Sukuk can be both fixed and floating, depending on the particular originator;
(b) Salam contracts are issued when payment is made in cash at the point of contract, but the delivery of the asset purchased is deferred to a pre-determined date;
(c) Murabaha contracts are those that cover the sale and purchase transaction for the financing of an asset whereby the cost and profit margin (mark-up) are made known and agreed by all parties involved. The settlement for the purchase can be a deferred lump sum payment or an instalment basis of payments;
(d) Modarabah contracts are used to finance a project or business venture whereby the investor (Rabb Al Maal) provides capital and a manager (Mudarib) manages the project or the business. A financial institution may act as the Mudarib for funds it mobilizes for investments in Shari'a compliant products. If the venture is profitable, the profit will be distributed based on a pre-agreed ratio and losses if any are to be borne solely by the provider of the capital (Rabb Al Maal);
(e) Istisna'a contracts are used primarily in project finance. Such contracts are not tradable securities since the underlying asset does not yet exist. The proceeds of such an issue would typically be used to construct the base infrastructure through multiple Istisna'a agreements;
(f) Mixed Ijara contracts are contracts where the underlying assets can comprise of Istisna'a or Murabaha receivables in addition to Ijara; and
(g) Mixed Ijara Sukuk allows for a greater variety of funds to be used since previously inaccessible Murabaha and Istisna'a assets can be used in the portfolio.
January 2014