Saudi Arabia's Sukuk selling crosses SAR 3.95 bn
Last month, the ministry sold 5.0 billion riyals of domestic Sukuk.Reuters | Updated: 27-05-2018 12:41 IST | Created: 27-05-2018 12:38 IST
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.