Understanding Islamic Finance - Doha Academy of Tertiary Studies

402 Understanding Islamic Financerequirements of debts. It is permissible for the issuer to redeem, either at the marketprice or as agreed upon at the time of purchase, the Sukuk of ownership of usufructof tangible assets from the Sukuk holder after allocation of Sukuk and payment ofsubscription amounts.— Certificates of ownership of usufructs to be made available in the future as perdescription. These are documents of equal value issued for the sake of leasing assetsthat the lessor is liable to provide in the future, whereby the rental is recovered fromthe subscription income, in which case the holders of the certificates become ownersof the usufruct of the future assets. The subscribers are buyers of usufructs and willhave both the risks and rewards. Such Sukuk can be traded after the asset is identified.It is not valid to sub-lease or trade in usufructs of an asset to be made available priorto identification of the asset, in which case trading must be carried out in line withthe rules of currency exchange. The trading rules in the case of sub-leasing of suchusufructs would be the same as those discussed above.— Certificates of ownership of services of a specified supplier. These are documents ofequal value issued for the sake of providing or selling services through a specifiedsupplier (such as educational programmes in a particular university) and obtainingthe value in the form of subscription income, in which case the holders of the Sukukbecome owners of the services.— Certificates of ownership of services to be made available in the future as per description.These are documents of equal value issued for the sake of providing or sellingservices through a nonexisting supplier with the description of the subject matter(such as educational programmes of a specific quality, schedule, duration, etc. withoutmentioning the educational institution) and obtaining the value in the form ofsubscription income, in which case the holders of the certificates become owners ofthe services. 16The following features may be kept in mind for securitization under Ijarah. It is necessaryfor an Ijarah contract that the asset being leased and the amount of rent both are clearlyknown to the parties at the time of the contract, and if both of these are known, Ijarahcan be contracted on an asset or a building that is yet to be constructed, as long as it isfully described in the contract, provided that the lessor should normally be able to acquire,construct or buy the asset being leased by the time set for its delivery to the lessee. Thelessor can sell the leased asset provided it does not hinder the lessee in taking benefit fromthe asset. The new owner(s) will be entitled to receive the rentals for the remaining period.Similarly, they can dispose of their share in the asset to the new owners individually orcollectively.As an Ijarah certificate represents the holder’s proportionate ownership in the leased asset,the holder will assume the rights and obligations of the owner/lessor to the extent of hisownership. The holder will have the right to enjoy part of the rent according to his proportionof ownership in the asset. In the case of total destruction of the assets, he will suffer the lossto the extent of his ownership. So, it is essential that the Ijarah certificates are designed torepresent real ownership of the leased assets, and not only a right to receive the rent.As per Sharī´ah rules, expenses related to the corpus or basic characteristics of the assetare the responsibility of the owner, while maintenance expenses related to its operation16 AAOIFI, 2004–5a, pp. 298–302.