Islamic Capital Market-Sukuk-Sukuk Musharakah

Islamic Capital Market-Sukuk-Sukuk Musharakah
Key Differences from Sukuk Mudarabah:

Capital Contribution: Both parties (investors and the company) must contribute capital to the business venture.
Loss Sharing: Loss sharing must be proportionate to capital contribution. Profit Sharing Ratio (PSR) is negotiable.
Management Participation: Both parties have the right to participate in the management of the business venture.

Typical Sukuk Musharakah Structure:

Sukuk Issuance: SPV/Issuer issues Sukuk (e.g., $100 million).
Subscription Payment: Investors pay Sukuk subscription to SPV/Issuer (e.g., $100 million).
Company Contribution: Company contributes capital to the Musharakah venture (cash or in-kind, e.g., $10 million).
Capital Transfer: SPV/Issuer transfers investor capital and company contribution to the Musharakah venture (e.g., $100 million + $10 million).
Profit Sharing: Profits from the Musharakah venture are shared between investors and the company according to an agreed PSR (e.g. 'y'% for each).

Important Considerations:

Business Venture: The capital is invested in a specific, identified business venture (e.g., upgrading airport facilities).
Capital Form: Capital contributions can be in cash or in-kind (e.g., equipment).
Profit Distribution:
- Profit is distributed according to an agreed PSR.
- Tanazul (Waiver): Investors can waive some profit in favour of the company.
- Investors expect periodic profit distribution, making Sukuk behave like fixed-income instruments.
Non-Debt Based: Neither Mudarabah nor Musharakah is a debt-based contract.
No Guarantee: There is no obligation to pay a fixed income or profit, and there is no guarantee on the capital invested.

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