Istisna’ – Ijarah SUKUK – Structure



Originator intends to finance Forward Financing Ijarah Contract (or Ijarah Mawsufa Fi Zimmah) through IJARAH SUKUK (PASS-THROUGH SUKUK)

  1. Originator signs a forward Ijarah deal (or Ijarah Mausufa Fi Zimmah) with its Customer
  2. Originator signs Istisna’a contract with SPV to construct the required asset for its Customer
  3. SPV sub-contracts the construction to Contractor and Consultants
  4. Credit Enhancer provides additional liquidity or security enhancement to the Istisna’a asset for rating purposes
  5. SPV packages the Istisna’a asset into SUKUK units for issuance to potential Investors
  6. Credit Rating Agency provides necessary credit rating to the SUKUK
  7. SPV / Issuer issues SUKUK to Investors at fixed/floating profit rates
  8. Investors subscribe to SUKUK
  9. SUKUK subscription generates required cash proceeds valued USD 100m
  10. SPV disburses progress payments to Contractor and Consultants
  11. Contractor delivers completed asset to Originator
  12. Originator delivers completed asset to Customer
  13. Customer pays periodic installments and Originator pass-through installments to SPV
  14. SPV disburses contracted periodic distribution (or lease rentals) to SUKUK Investors
  15. Being finance nature of Ijarah, on lease expiry/termination date, Originator sells the Ijarah asset to Customer and disburses the sale proceeds to SPV
  16. SPV redeems the SUKUK and disburses remaining cash back to Investors


Key Sharia’ah Constraints

·         SUKUK is of “Debt” nature until asset is completed and leased therefore not-tradable in the market until completed and leased out