BIL. DIFFERENCES DEBT SUKUK EQUITY SUKUK 1. CONCEPT / MEANING · After investor (sukuk holder) pays the Purchase Price, Issuer owes a debt to sukuk holder. · Issuer do not distribute company’s profit to sukuk holder. · Sukuk holder will receive fixed amount of money periodically (selling price instalment) from Issuer.
· For debt sukuk, the holding period depends / as stated in the contract, thus it has a specific period of time. · Sukuk holder made an investment in Issuer’s business thus, gain or have control in terms of ownership of the business. · Issuer needs to distribute company’s profit to sukuk holder according to the contract signed. · Issuer needs to arrange the 6 monthly profits (if any) based on agreed Profit Sharing Ratio, thus no fixed payments guaranteed from Issuer. · Sukuk holder can holds the investment as long as the company still exist (business ongoing). 2. CERTAINTY OF RETURNS Predictable / Certainty (received fixed amount according to agreed schedule of payment) Unpredictable / No certainty (No ceiling as well as no floor to amount of profits).
3. CERTAINTY OF CAPITAL Predictable (100% will received back the capital) Unpredictable (might lose the investment) 4. TYPES OF CONTRACTS / STRUCTURES a. Sale-based (Murabahah, Bai Bithaman Ajil (BBA), Salam and Istisna’) b. Lease-based (Ijarah, Ijarah Muntahiyah Bittamlik and Ijarah Mawsufah fi Dhimmah) a.
Partnership-based (Musharakah and Mudharabah) b. Agency-based (Wakalah Bi Istithmar) 5. EXISTENCE OF UNDERLYING ASSETS Required (sukuk holder have to buy assets from the obligor). Not required (sukuk holder only provide monetary capital). 6.
COST OF FINANCING (FROM ISSUER PERSPECTIVE) Lower than equity sukuk. Higher than debt sukuk. 7. DEBT EQUITY RATIOS (FROM ISSUER PERSPECTIVE) The Issuer need to comply with the ratios.
The Issuer do not need to comply as it is not a debt instrument. 8. SECONDARY TRADING Fits easily with Trading System & Regulations, thus easy to price in Secondary Trading. Harder to sell in secondary market as compared to debt sukuk due to its value.