The Islamic finance system has arisen due to various religious
and economical reasons and, in general, it is a system where any
and all kinds of financial activities and transactions are applied
within the scope of Islamic rules. This market is established based
on applying the principles and rules brought in by Islam to the
financial transactions. Considered as an alternative field to the
modern finance understanding, the Islamic finance quickly develops
as an alternative field in the global finance markets in the light
of the developments during the recent years. The framework of an
Islamic financial system is being established in line with various
rules and laws which the Islamic communities are subjected to in
terms of economical, social, political and cultural aspects.
The basic difference of Islamic finance and traditional finance
is that the "interest", located in the center of the
traditional financial transactions, is prohibited in the Islamic
finance. If the money paid for the debt instrument is different
than its nominal value, then the difference between them is
described as interest. The Islamic religion considers this
difference as an unfair increase, therefore prohibits the trading
of any debt instrument for a value other than its nominal value.
With the interest prohibition in question, it's aimed to
prevent any unfair capital increase at a loss of someone else. In
addition to this, only partnering for profit without taking any
risk and without partnering to loss is also a prohibited
transaction in the Islamic world. Debt instruments issued without
taking the abovementioned into account are not accepted as an
Islamic debt instrument.
For the Islamic law, the provisions of the agreement should be
definite for the legal transactions and particularly for the
agreements putting both parties under an obligation. In other
words, the subject matter of the agreement should be known and
definite. Particularly the agreements with substantial
uncertainties are not considered as suitable for sharia.
According to the Islamic rules, the activities based on making a
gain from the loss of someone else such as gambling, betting and
games of chance are also prohibited.
Within this scope, the financing methods developed by the
Islamic financial institutions can be categorized in general as
Mudaraba (labor capital partnership), Musharaka (profit-loss
partnership), Murabaha (cost plus profit margin sales), Ijara
(lease financing), Quard‑Hasan (interest-free loan),
Istisna'a (order based procurement) and Sukuk.
As one of these financing methods, Sukuk is an important
financial instrument suitable to the interest‑free banking
principles developed for increasing the financing in the
international capital markets. The basic rule in Sukuk is that it
has to be based on an asset different than the traditional debt
instrument bonds. In the simplest term, Sukuk shows owning an asset
or benefiting from that asset. According to this system, the main
company assigns the properties subject to the Sukuk transaction to
a company established for a special purpose, and this company
securitizes and sells these assets to the investors. In the Sukuk
system, the receivables are securitized based on the asset. As a
result, it allows the buyer to get a share from the revenues
obtained from the assets, in addition to the proceeds arising from
the sales of the assets. Sukuk has become a global investment
instrument and also defined as "interest‑free
bond". The Turkey version of Sukuk has entered to our
legislation as lease certificates as a similar instrument and is
regulated in the "Communiqué on Lease
Certificates" no. III-61.1 (Communiqué) of the Capital
Markets Board of Turkey. Lease certificate means the security which
is issued by the asset leasing company in order to provide
financing to any kind of asset and right and allowing the lease
certificate holders to be entitled for the revenues obtained from
this asset or right, in the rate of their shares.
Carried out within the scope of the abovementioned rules and
principles, the operation of the Islamic financial services and
products vary from country to country, and recorded a significant
improvement during the recent years. Examining and considering the
other examples in the world, the Islamic financial system appears
as an effective system in the fund transfer process as an
alternative financial brokerage.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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