sukuk al-murabaha

sukuk al-murabaha
International, USA
A form of sukuk derived from the murabaha financing structure. In a sukuk al-murabaha transaction:
• A special purpose vehicle (SPV) buys from a supplier an asset the borrower has identified.
• The SPV finances the purchase of these assets with the proceeds of a sukuk issuance.
• The SPV sells the asset to the borrower for the original purchase price plus a pre-agreed profit element.
• The borrower pays the purchase price in installments.
• The borrower sells the asset on the spot market and keeps the proceeds.
• Following this transaction, the borrower has immediate access to cash (the proceeds of the asset sale) but its obligation to pay the purchase price to the SPV is deferred.
For a diagram of the structure of a typical sukuk al-murabaha transaction, see Checklist, Islamic Finance Deal Structure: Sukuk al-murabaha (www.practicallaw.com/6-501-1199).

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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