Issue No. 126 of CBB's Sukuk Al-Ijara oversubscribed by 220%

The Central Bank of Bahrain (CBB) has announced that the monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijara, has been oversubscribed by 220%.

Subscriptions worth BD57.2 million were received for the BD26 million issue, which carries a maturity of 182 days. The expected return on the issue, which begins on 11 February 2016 and matures on 11 August 2016, is 2.14% compared to 2% for the previous issue on 14 January 2015.

Sukuk Al-Ijara are issued by the CBB on behalf of the Government of the Kingdom of Bahrain.

This is issue No.126 (BH0005L57493) of the short-term Sukuk Al-Ijara series.

Malaysia's Shariah Advisory Council refines rulings on Islamic finance at 165th meeting

The Shariah Advisory Council (SAC) of the Central Bank of Malaysia recently discussed on the issue of application of tabarru` (تبرع voluntary gifts) contracts in takaful, transfer of ownership of hibah (هبة) assets, breaches of condition in wakalah bi al-istithmar contracts (وكالة لابالاستثمار agency contracts for investment) and wa`d (وعد promise) which is attached to action, time or situation.

The SAC has decided the following at its 165th meeting dated 26 January 2016:

Application of tabarru` in takaful

• The underlying concept/principle for takaful scheme is tabarru` and ta`awun (تعاون mutual assistance) among the takaful participants.
• Tabarru` in takaful is applied through contributions from the participants to the tabarru` fund which is managed by (and entrusted to) the takaful operator in the interest of takaful participants, based on the agreed terms and conditions.
• The financial obligations (الذمة المالية zimmah maliyah) of a tabarru` fund are independent of the financial obligations of the takaful operator and the individual takaful participant. 

Transfer of ownership of hibah assets to the hibah recipient

The SAC has decided that in hibah contracts the ownership of the hibah asset is generally transferred effectively once the hibah recipient takes the possession (قبض qabd) of the hibah asset physically or constructively. This forms the basis for transfer of ownership of hibah asset. Without qabd, the donor may still revoke the hibah. 

However, in conditional hibah, the ownership of the hibah asset is effectively transferred to the hibah recipient upon the occurrence of agreed conditions. This forms the basis for transfer of ownership of hibah asset in conditional hibah. As such, in conditional hibah, it is not possible for the donor to revoke the hibah upon the occurrence of the agreed hibah conditions even though the hibah recipient has yet to take possession of the hibah asset physically or constructively. Notwithstanding this, hibah which is attached to the condition of the demise of the donor shall only be applicable in the context of takaful. This is to provide certainty to the beneficiary in relation to his ownership of the takaful benefit upon the demise of the donor/participants even though he has not yet taken possession (qabd) of the hibah asset, in this case, the takaful benefit.

Breach of conditions in wakalah bi al-istithmar contracts

The SAC has decided that in the event of breach of condition by wakil (وكيل agent) under the wakalah bi al-istithmar contract, in line with its ruling in the previous 150th SAC meeting, the wakil shall guarantee:

• Investment capital; and
• Actual profit generated up to the date of breach of condition. 

In addition to the above, the SAC has decided that the investor (الموكل muwakkil) is eligible to claim actual cost incurred due to the breach of condition by the wakil.

In the event of breach of condition that results in higher-than-expected profit, the excess profit shall be treated based on the agreed terms and conditions in relation to performance fee. If the terms and conditions are not stipulated or not agreed, the excess profit is subject to the discretion of the muwakkil. 

This ruling is based on the principle that wakil performs his duty on the basis of trust (أمانة amanah) and he is not allowed to guarantee the investment capital and profit except in the event of misconduct, negligence and breach of condition by the wakil. This is in line with the opinion by several fuqaha (فقهاء experts in Islamic law) that allow sharing of profit in mudarabah in the event of breach of condition by the mudarib (مضارب manager). In addition, the permissibility to claim actual cost incurred due to the breach of condition by wakil is a form of penalty for the breach and also intended to emphasise on the aspect of amanah and discipline on the wakil.

Wa`d attached to action, time or situation

The SAC has decided that wa`d is binding (ملزم mulzim) on the promisor if the wa`d is attached to any of the following:

• A particular action which is done by a party including the promisee in the future;
• A particular time or date; or
• A particular situation which will occur in future. 

This ruling is based on the view of fuqaha that wa`d which is attached to conditions is binding. The types of conditions, which are attached to the contract as outlined by fuqaha that include a particular action, date/time and situation may be applied in the context of conditions attached to wa`d.

This ruling may clarify the types and categories of conditions attached to wa`d that lead to the bindingness of wa`d, especially in the financial instruments that involve promise to enter into contract that is attached to a particular date/time in the future.

Interested?

Read the hibah concept paper from BNM dated January 2016 (PDF)

January sukuk issuances by the Central Bank of Bahrain oversubscribed to date

The Central Bank of Bahrain (CBB) has announced that the monthly issue of the Sukuk Al-Salam Islamic securities for the BD43 million issue, issue no. 177, has been oversubscribed by 154%.

The expected return on the issue, which begins on 20 January 2016 and matures on 20 April 2016, a maturity of 91 days, is 1.9% compared to 1.75% for the previous issue on 23 December 2015.

The CBB earlier announced that the monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijara, issue No. 125, have been oversubscribed by 185%.

Subscriptions worth BD48 million were received for the BD26 million issue, which carries a maturity of 182 days. The expected return on the issue, which begins on 14 January 2016 and matures on 14 July 2016, is 2% compared to 1.8% for the previous issue on 17 December 2015.

Both Sukuk Al-Salam and Sukuk Al-Ijara are issued by the CBB on behalf of the government of the Kingdom of Bahrain.

Islamic Development Bank signs US$70 million development agreement for Tajikistan

The Islamic Development Bank (IDB) has signed a US$70 million development financing agreement with Tajikistan on the sidelines of the World Bank and International Monetary Fund (IMF) annual meetings in Lima, Peru.

The agreement contributes towards financing a power grid network project connecting the Central and South Asian nations. The project aims to provide sustainable electricity flow between Kyrgyzstan, Tajikistan, Afghanistan and Pakistan in line with their regional economic integration framework.

It is based on the sale of surplus hydropower generated in Tajikistan and Kyrgyzstan, and is expected to impact the foreign currency income of both countries.

100% subsciption for CBB's Sukuk Al-Ijara

The Central Bank of Bahrain's (CBB's) monthly issue of the short-term Islamic leasing bonds, Sukuk Al-Ijara, has been subscribed by 100%.

Subscriptions worth BD26 million were received for the BD26 million issue, which carries a maturity of 182 days. The expected return on the issue, which begins on 17 September 2015 and matures on 17 March 2016, is 1.40 % compared to 1.31% for the previous issue on 13 August 2015.

The Sukuk Al-Ijara are issued by the CBB on behalf of the Government of the Kingdom of Bahrain.

This is issue No.121 (BH000577N570) of the short-term Sukuk Al-Ijara series.