What is Sukuk ?

What is Sukuk?

Sukuk is Arabic word which means legal instrument. It was, then, adopted to describe financial certificate; and now in modern Islamic finance, Sukuk means Islamic bonds equivalent to conventional bonds. Sukuk is in compliance with the Islamic economic laws.

When did Sukuk Started?

Sukuk had been used in medieval times in the Islamic societies in trade and business for the transaction of money. It was like a cheque backed with a guarantee of prescribed money or valuable on the certificate.

The concept of modern Sukuk has been derived from the concept of monetization or securitization. The money is procured through the issuance of Sukuk, which is, then, used in conformity with economic laws of Shariah.

How does it work?

Sukuk is an expression of potential benefit from some asset through complete or partial ownership of the investor of that asset. That benefit is supposed to be achieving in a prescribed period of time. The concept of Sukuk underlies the risk, profit and return of the money from a particular asset which belongs to Sukukholder.

The money generated through Sukuk is often designed as Ijarah or leasing transactions of the assets, which are tradable especially for the secondary market. A Sukuk authority like Islamic government, bank or some company issues certificates of Sukuk to interested investors. The raised funds are then used in, for example, property to generate rent, by giving property on lease for a specific period of time, which is correspondent to the time period of the Sukuk bonds. Car Ijarah, Laptop Ijarah, investment in residential projects are main areas of investment of Sukuk.

Sukuk is comparatively a new concept in the modern Islamic finance so it needs to be dealt with good governance. Executive education in Islamic finance should focus on the feasibility of Sukuk and how to use in other areas of Islamic finance keeping in view the Islamic laws of economics.

How is it different to conventional bonds?

Apparently Sukuk is similar to conventional bonds but the main difference is that Sukuk is asset-based, not just the paper derivatives like that of conventional bonds. Conventional bonds create money out of money, of which a set portion of interest is returned to the investor who invests through bonds, while, the purpose and obligations of Sukuk must be clear and transparent; the money generated through Sukuk must not deal in interest based business activities.

How far is it successful?

Since the modern inception of Sukuk in Islamic finance, it is getting momentum but only for some short-term halts due to financial restraints in some markets due to lack of good governance.The main reason behind the progress of Sukuk is the good governance, executive education, and liquidity management. Sukuk helps to generate and place short and medium term funds to enhance cash flow in Islamic finance. Here are some facts:

• In the year 2003, the State of Bahrain issued Sukuk of 250 million US dollars. The money was used in Ijarah or lease in the national airport.

• Dar Arqan, the biggest Saudi based private developer company heavily depends on the Sukuk bonds to run its mega projects

• Saudi bankers are in great anticipation of bumper sale of Sukuk in 2012 after the success of the fist issue of Sukuk in January 2012.

• The Central Bank of Bahrain's monthly issuance of Sukuk has reached to 190%.

It is observed that the Muslim masses prefer to invest through Sukuk to an un-Islamic investment with similar risk.

Potential for Mudarabah and Musharakah bonds

There is potential for the Mudarabah and Musharakah Sukuk but to make them in compliance with Islamic economic injunctions and resolve the underlying issues much debate, homework is needed to get the approval from the Shariah scholars. It would need executive educating to make it a complete success.

The Madinah Institute for Leadership and Entrepreneurship (MILE) brings senior executives and high potential leaders from all over the world for executive education to discover new dimensions in Leadership Development, Good Governance, Telecom Training, HR Performance and various other management practices to help them grow in their business careers.

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Five Types of Forex Brokers

Five Types of Forex Brokers

There are several types of Forex dealers with online access. They range from the perfectly legitimate brokerage firms to illegal betting houses. Each trader will have to choose their type of dealer carefully to select the right type of dealer – many share similar qualities and access to the Forex market, but their policies and procedures differ quite dramatically.

Beginning traders need to be especially vigilant about the type of dealer they select. Remember, the Forex market remains loosely regulated and this allows for a wide range of trading services that may not be suitable for many traders, particularly beginning traders.

Each type of broker represents a different level in the Forex market. Some levels are very high and have direct access to the Forex market while others are very distant and have very little connection to the Forex market. Yet most of these types of broker are legal in most countries and are used by different types of traders.

• Bucket Shops
  
  This type of broker has virtually no connection to the real-world Forex market. Bucket shops depend largely on using currency futures and options. These types of brokers will essentially “book” or take the opposite position of a trade made by a retail trader. However, they will not actually execute them on any exchange. Basically, the bucket shop is betting against the trader. Since the legality of bucket shops is questionable, this type of broker should be avoided by beginning traders.
• Book makers
  
  A book maker is very similar to a bucket shop. However, the book maker does not earn profits by winning the “bet”, but rather makes profits based on the spread (difference between the buy and sell price) of the trade. Like the bucket shop, this type of broker has little or no connection to the Forex market. Book makers are illegal in the United States and many other countries. Book makers are also called spread betters or spread betting companies.
  One example of a book maker (or spread better) is Delta Index .
• Retail Market Maker
  
  These types of brokers represent the vast majority of online Forex dealers. They differ in many respects and offer a wide range of services. Most traders will use a retail market maker. They take different approaches in their connection to the Forex market. Some are directly connected while others deal with an intermediary for access to the Forex market.
  Retail market makers are suitable for beginning Forex traders, but they should consider the services offered before making a selection. They are legal in the United States and most other countries.
  Examples of Retail Market Makers are FXCM , Ifx andGain Capital.
• Institutional Market Maker
  
  These types of broker are very closely aligned with the Forex market. They have a more direct connection than most Retail Market Makers. They are very suitable for beginning traders, but usually require large amounts of money for direct access to the interbank market.
  An example of an institutional market maker is FXALL.
• Institutional Forex
  
  Institutional brokers are directly connected to the Forex market. This consists of a consortium of approximately 200 banks. It also represents nearly half of all Forex trading. This is not suitable for beginning traders since only banks are allowed to participate. If any broker claims to have direct access to the Interbank market, they are committing a fraud since only banks have this type of access.
  An example of an Institutional Forex dealer is ICAP.

So, these are the five different types of brokers. Actually, only four types are available individual traders. The most appropriate type of broker is the Retail Market Maker. There are many different types of Retail Market Makers and they are easy to find. However, traders must closely investigate this type of broker to make sure that it offers the necessary services and that it does not engage in fraudulent activity.

Book makers and bucket shops should be avoided because they are not regulated by the Commodity Futures Trading Commission.


John Russell

I Have Money to Invest, What Should I Do - Making the Transition From a Worker to an Investor

Not a lot of people are lucky enough to be in a position where they can ask the following question:

I have money to invest what should I do?

For those that are indeed lucky enough to be able to ask that question, your frame of mind alone is positive enough to ensure your future success, as someone who is happy in their life and enjoys the various benefits of living a life of financial freedom.

If you have come to the realization that investing your money is the way to go, you have a lot of positive thinking going for you and chances are you have a steady flow of income which you can always fall back on and you understand that investing has a fair amount of risk attached to it.

Investing, as exciting and rewarding as it can be, indeed has some risk integrated into it, but when you ultimately complete the transition from being a worker to an investor, you will do so only when you have enough cushion money to break your fall, should such a fall culminate and you can start from a fair position to build up your wealth again.

If you have money and want to invest it what you should do is first conduct some research. Find out which investments you can fill your investment portfolio with as there is a method to this apparent madness.

You can't just throw your money into anything and everything that comes along -- you have-to-have a systemic approach, particularly if you want to see the kind of returns that will make your effort pay off.

You may have some spiritually motivated limitations that would keep you up at night, prompting you to stay away from investment structures that counteract those spiritual views. For instance, if you are against the manufacture of firearms, you will naturally want to stay away from investment structures that support that industry.

It is one thing wanting to maximize profit, out of each and every opportunity that arises, but you have to be methodical so as to formulate a regime that will see you through the trying times of any market turn. If you are all over the place then you cannot deploy any contingency plans that will see you through the times when the markets don't act according the norm.

Being in the situation that you find yourself, having a steady income that you want to supplement with investments, until you can make a complete transition from working to investing, you will first want to decide what kind of investments you want to get into.

Do you seek the thrill of the stock markets, the adrenalin rush of futures trading, or do you simply want a steady, safer way to invest your money?

Naturally you'd want a mixed investment portfolio, with a sizable portion geared towards long-term, slower capital gains and a small-to-medium sized portion allocated to more risk taking in hope of quicker, higher returns.

That way all your bases are covered and anything that comes in, in addition to the safer returns shall be treated as a bonus.

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