Writer: Hassan Azganin
The global Sukuk is gaining traction continuously in the current market due to the high level of innovation and creative ideas where there is a potential opportunity to expand further to new markets. The Securities Commission (SC) in Malaysia launched the Socially Responsible Investment (SRI) sukuk on 28, August 2014 in order to facilitate the financing of sustainable and responsible investment projects, achieving with that the objectives of Shariah. According to SC, the Eligible SRI projects are divided into four parts:
- WAQF Properties/Assets
- Natural Resources
- Renewable Energy and Energy Efficiency
- Community and Economic Development
Source: Securities Commission Malaysia
Our focus on this article will be on the first type which is Waqf development of any projects that undertake the development of Waqf properties or assets, and which can be provided by FINTERRA in its second phase of the WAQF Chain project. It is well-known that there are thousands of Waqf lands left idle in different Muslim countries, and lack of financing was the bottleneck for the Awqaf institutions in developing Awqaf assets and properties. Here, FINTERRA comes to the rescue!
FINTERRA’s WAQF Chain aims to increase engagement and raise awareness as well as funds for WAQF development via crowdfunding of WAQF projects. The use of blockchain technology goes a long way in making processes more efficient, transparent and immutable. This is in keeping all procedures and transactions in line with Shariah principles.
Finterra is planning to create an ecosystem conducive for SRI investors in Malaysia because more than half of the sukuk issued worldwide are in Malaysian Ringgit currency. Not only this!
Malaysia has been recognized to be the World’s largest sukuk issuer in 2016. According to MIFP (2016), the sukuk market of Malaysia, Gulf countries, Indonesia and Turkey continued to expand with total issuance reaching USD 65.8 billion. The largest sukuk issuer were Malaysia amounting to USD 34.7 billion and representing more than 46% market share of the mentioned sukuk market. Followed by the Gulf countries with a total of USD 19.6 billion, then Indonesia and Turkey with an amount of USD7.4 Billion and USD 1 billion respectively. The majority of issued sukuk were sovereign sukuk allocated for infrastructure development of Muslim countries. The investment opportunities that will be provided by FINTERRA are going to create an Islamic investment ecosystem that gathers investors to make moneygetting return from investment and have a social impact at the same time.
However, how are investors going to have social impact with the money invested in Awqaf properties? To illustrate, imagine there is an Awqaf land beside the beach in Penang and there is a finance need to construct a Halal five-star hotel. The Awqaf institution will approach FINTERRA to raise fund for them via crowdfunding platform using SRI Ijarah sukuk, for example. The hotel will be constructed, and payments will be made on a monthly or yearly basis to pay back the capital plus profit to the investors. Upon completion of the leased period agreed upon, the Awqaf institution will fully own the project and of course there will be a monthly return coming from it. This generated return will be channelled to the beneficiaries including poor people, orphans, etc. This is going to change thousands of lives, alleviating poverty and empowering the economy of the country.
2016 GLOBAL SUKUK MARKET: A RECORD YEAR FOR CORPORATE ISSUANCE. retrieved from: http://www.mifc.com/index.php?rp=sukuk_report_270317.pdf