Ijarah Sukuk
Sale and leaseback sukuk structure
Ijarah sukuk where the originator sells real assets to a Special Purpose Vehicle (SPV), which then leases them back and issues sukuk to investors, are permissible provided the sale is genuine and rental payments reflect market rates.
Accounting and Auditing Organisation for Islamic Financial Institutions
Full Ruling
An ijarah sukuk structure is permissible under the following conditions: (1) The underlying assets must be tangible, Shariah-compliant, and owned by the originator. (2) The sale to the SPV must be genuine and not a sham to circumvent direct borrowing. (3) Rental amounts must reflect fair market rates. (4) Sukuk holders bear the risk of the asset (including damage, destruction, or unexpected major repair costs). (5) The purchase undertaking at maturity must be at fair market value or a pre-agreed formula, not guaranteed par value.
Rationale & Reasoning
Ijarah (leasing) is a well-established Shariah contract. Packaging ijarah contracts as tradeable instruments follows the principles of securitisation of legitimate receivables — provided the underlying contract is valid.
Rule Basis (Daleel)
- 01Validity of ijarah contract
- 02Securitisation of halal receivables
- 03AAOIFI SS-17
Conditions for Permissibility
- ✓Genuine asset sale to SPV
- ✓Market-rate rental
- ✓Tangible, Shariah-compliant underlying asset
- ✓Redemption price at fair market value
Citations & Sources
AAOIFI Shariah Standard No. 17 – Investment Sukuk
AAOIFI · 2003
Ref: SS-17