Saudi Arabia's Sukuk selling crosses SAR 3.95 bn

Last month, the ministry sold 5.0 billion riyals of domestic Sukuk.

Saudi Arabia's finance ministry sold 3.95 billion riyals (USD1.05 billion) of domestic Sukuk in its monthly sale by re-opening an issue originally made last month, the ministry said.

It sold 3.35 billion riyals of five-year Sukuk, 350 million riyals of seven-year and 250 million riyals of 10-year. Last month, the ministry sold 5.0 billion riyals of domestic Sukuk.

Sukuk is an Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia Islamic religious law.

Since the traditional Western interest-paying bond structure is not permissible, the issuer of a sukuk sells an investor group a certificate and then uses the proceeds to purchase an asset, of which the investor group has partial ownership.

The issuer must also make a contractual promise to buy back the bond at a future date at par value.

Sukuks represent aggregate and undivided shares of ownership in a tangible asset as it relates to a specific project or a specific investment activity.

An investor in a Sukuk, therefore, does not own a debt obligation owed by the bond issuer but instead owns a piece of the asset that's linked to the investment.

This means that Sukuk holders, unlike bondholders, receive a portion of the earnings generated by the associated asset.