Sukuk Financing Product Key Facts ( Download)
| What is the product Sukuk Financing is a bank sharia’a compliant product designed to help customers to enhance their potential returns in their investments in Sukuk. This product allows customers to purchase Sukuk using the bank financing facilities, thereby increasing their investments capacity without the needing to commit a large amount of their own capital upfront. Sharia Structure The Sukuk Financing is carried out through the implementation of a National Bonds Murabaha contract, based on a promise obtained from the customer upfront, Bank purchases the underlying assets and subsequently sells it to the customer at a sale price, which is a combination of cost price plus profit amount calculated with reference to profit rate. The sale price is payable by the customer during the term of finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Key Terms and Features | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| SIB: Sharjah Islamic Bank | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Internal Shari'a Supervision Committee: a committee appointed by Sharjah Islamic Bank, consisting of a group of scholars specialized in Islamic financial transactions, independently supervises transactions, activities and special products, and ensures their compliance with Islamic Shari'a in terms of the bank's objectives, activities, operations and rules of conduct | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Customer: Means Investor and/or SIB’s existing customer(s) who is eligible for availing this product Collateralized Murabaha Agreement : an agreement between SIB and the customer where the customer (the buyer) provides Collaterals to secure the deferred payment obligation Murabaha Contract: SIB use National Bonds Murabaha product to provide Sukuk Financing. Key statements are to be read in conjunction to Key statement, terms and conditions of National Bonds Murabaha product By signing the Collateralized Murabaha Agreement and the Murabaha Contract the customer must abide to the terms and conditions of these agreements Minimum Investment: Amount specified in the Offering Document of the Sukuk is subject to a minimum of USD 200,000 (or its equivalent) or such other amount as may be prescribed by the Promoter/Agent or Issuer Minimum Customer Contribution (Face Value) : USD 100,000 Investment Currency ( Underlying Sukuk) : Sukuk are denominated in US dollars or UAE dirham, unless stated otherwise on the Offering Document Financing Currency : AED Financing Amount: the financing amount is determined as % of the market value of the underlying Sukuk against which Finance is provided. E.g. If assigned financing is 1:1 or 50% of the investment amount, then for investment of AED 1 Million; the Bank will provide Finance of AED 500,000 to the Customer Tenor/Maturity - Underlying Sukuk: It is the date specified by the issuer to redeem the outstanding amounts. On this date, the issuer pays the full principal plus any profit due to investors at Par value Tenor/ Maturity – Financing: is the date specified in the Murabaha Contract which is usually aligned with the Tenor/ Maturity of the Underlying Sukuk , not exceeding a tenor of 5 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fee:
Example: A customer want to invest USD 200,000 into a sharia compliant Sukuk (the underlying asset) by availing a Sukuk financing facility 0f 50% of the investment amount. Assuming a financing tenor of three years and a Sukuk investment( underlying assets) that pays 7% semiannually, the Fees and the Profit payment will be calculated as per the following; Sukuk Trading Fee: · Customer Equity : USD 100,000 (AED 367,500 Approx) · Finance Amount: USD 100,000 (AED 367,500) · Purchase Price: 101.5 · Trade Settlement amount: 200,000*101.5= 203,000 (AED 746,025) · Administration Fees: USD 200,000 * 0.1%= USD 200 (AED 735) · Administration Fees VAT: USD 200 * 5% = USD 10 (AED 36.75) · Total to b debited : USD 103,210 (AED 379,297) Sukuk Finance Fees: · Processing Fees : Nil · Murabaha Profit rate: assuming reference rate 3.5%, profit=1.5% +3.5% = 5% · Annual Murabaha Amount: AED 367,500*5% = AED 18,375
Note: the above example is for illustrative purpose only and may vary based on profit distribution rate of the underlying Sukuk and the prevailing Murabaha profit rate at the time of executing the Murabaha contract | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warning: Sharjah Islamic Bank is merely a Promoter/Agent of the Sukuk trading/dealing on the Customer’s behalf on execution basis only and is not liable for any delay or default on Profit distribution by the issuer.in such scenario, the customer is still obliged to pay the Murabaha Profit amount and the principal repayment on the agreed dated as per the Murabaha contract. if the customer, for any reason, failed to meet their obligations , then SIB has the right to take the necessary legal action | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Early Settlement: the customer can settle the Financing prior to the maturity date that is defined in the Murabaha Contract. Early settlement will not trigger any additional fees. The customer in this situation will have to pay the total of 1) Financing Principle Amount 2) any unpaid and accrued Murabaha Profit 3) the Murabaha Profit for the remaining period. The bank has the right but not the obligation to waive the unearned Murabaha Profit based on bank’s own discretion. Example: assuming the finance amount is AED 500,000 and the accrued Profit is AED 10,000 , while the unearned profit is AED 30,000, then the customer if he is planning to exit before the maturity date then the due amount will be 500,000 + 10,000 + 30,000 = AED 540,000. Service Agency: Under the service agency, Bank appoints the customer as its service agent to manage underlying assets. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Collateral: Sukuk, Mutual Funds (including Exchange Traded Funds – ETF), Equities or any other approved investment | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Finance to Value (FTV): The Financing amount to the market value of Collateral against which Finance is provided. E.g. If assigned finance is 1:1 (@ 50% FTV) for investment of AED 1 Million; the Bank will provide Finance of AED 500,000 to the Customer | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Margin Call: The FTV threshold at which Customer must make a cash payment or provide additional Collateral acceptable to the Bank, within 2 business days of the Bank’s notice of a Margin Call, of sufficient value to regularize the FTV back to the original FTV. If the Margin Call is not regularized within this time period, the Bank may immediately accelerate, where applicable, all amounts due under the Finance, and liquidate the investment If the customer provided the additional collateral in cash payment form , then it will be kept in customer’s account or invested on customer’s behalf, at customer’s discretion | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Secured Obligations: · Investment for which Finance is availed will be held under lien until the Finance is fully settled. A Personal Guarantee of the authorized person is required in respect of Customer(s) who are corporate entities. Additional Collateral provided for Margin Call will also be held under lien | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · The Bank may dispose of the Investment and/or additional Collateral in the event of failure to service Margin Call or pay Finance at maturity. Any outstanding amounts due under the Finance may be settled from any other account held by the customer at the Bank Cooling-off Period As per Consumer Protection Standards, you have the right to a cooling-off Period of 5 complete business days at time of signing the agreement for the purchase of a financial product or service. However, given the nature of Sukuk transaction, you hereby confirm you chose to waive your right to a cooling-off period irrevocably, and hence your application will be immediately processed on best effort basis. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Notice Period | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · The Bank may amend the Terms and Conditions of Investment Product Finance subject to sixty (60) calendar days’ notice except for notice related to pre-closure and Margin Calls which have to be satisfied in terms of the specific notice | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · We may give notice of variations by any means available, including but not limited to email and secure e-message service and by publication on our website (www.SIB.ae) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Key Risks: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| WARNINGS: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · Investment Product Finance could result in partial or, in extreme cases, total loss of the customer own contribution for the investment underlying the Finance | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · At maturity, the customer will have to make payment for all the customer obligations under Finance even if the performance of the investment is negative | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · Failure to meet the customer payments obligations on time may negatively affect the customer credit rating, which will limit the customer ability to access financing in the future, additionally the bank will have the right to sell all or part of the collateralized Sukuk to pay all of the outstanding financing amount including principle repayment and unearned profits | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Warnings: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · Investments in Sukuk under this product is not a bank deposit and as such is not capital protected or capital guaranteed and may result in loss of Customer’s principal invested amount | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · Sharjah Islamic Bank is merely a Promoter/Agent of the Sukuk trading/dealing on the Customer’s behalf on execution basis only and is not liable for the performance of the Sukuk or its valuation. · Past performance of an investment is not a reliable guide to or indicator of future performance · Customer should seek professional financial and Sharia, accounting & regulatory advice(s) prior to deciding to invest through this product and not rely on the Agent in making any investment decision on Customer’s behalf | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| · Customer should carefully review the Offering Documents, including the Offering Documents, Master Collateralized Murabaha, Transaction form and Pledge agreement , ,of the respective Sukuk and seek professional advice (including financial, Sharia, accounting, regulatory and legal advice) where the documents are not available in the preferred language of the Customer · SIB will provide a copy of the Offering Documents and the Sharia certificate to customers upon their request. · Should you have any complaints, please get in touch with SIB's Phone Banking services available 24-hours a day, 7 days a week Telephone: +97165999999 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Disclaimer: This product has been approved by the Sharjah Islamic Bank’s Internal Sharia Supervision Committee | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
| By signing this document, I/We acknowledge that I/We have read, understand, and agree to all of the above terms and product facts outlined which have been explained to me/us | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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