Search results
1 – 3 of 3A.M. Hafizi, Shahida Shahimi, Mohd Hafizuddin Syah Bangaan Abdullah and M. Badrul Hakimi Daud
Islamic Finance and Investment
Abstract
Subject area
Islamic Finance and Investment
Study level/applicability
Level of program/audience: Advanced undergraduate and postgraduate.
Courses
Intermediate and Advanced Finance, Economics, Islamic Economics & Finance, Islamic Banking & Finance, Islamic Capital Market and other relevant courses.
Specifictopics/syllabus
Capital markets instruments, conventional or Islamic.
Case overview
This case focuses on Tracoma Holding Berhad Bai Bithaman Ajil Debt Securities (BaIDS) amounting to RM 100 million which was issued by Tracoma Holding Berhad in 2005. It was the first issuance of a sukuk (Islamic debt securities or bond) by the company. The proceeds were used to finance its growth and to repay existing bank borrowings and capital requirements. This case is interesting, as it allows students to study the bai bithaman ajil sukuk structure and issuance process in the Malaysian capital market. It also provides basic financial transaction and credit rating of sukuk which requires analytical skills. Being a debt-based facility, the sukuk was subjected to credit rating evaluation by the MARC, the rating agency appointed by the company. Further downgrading of the sukuk meant it would lead to the worst-case scenario. Some actions needed to be taken to solve this issue; therefore, the CFO suggested an urgent meeting with the sukuk holders.
Expected learning outcomes
The students should be able to: understand the issuance process and the principle of BBA (bai bithamin ajil) in sukuk structure; understand reason(s) methods of fund raising by firm and the allocations of fund; understand the sukuk default issue; analyze the reasons for sukuk default; understand the importance of debt securities credit ratings; and identify investors' protection in the case of sukuk default.
Supplementary materials
Teaching notes are available for educators only. Please contact your library to gain login details or email support@emeraldinsight.com to request teaching notes.
Details
Keywords
Nafis Alam, Muhammad Bhatti and James T.F. Wong
The purpose of this paper is to investigate the default characteristics of Sukuk issues by corporate firms in Malaysia using value-at-risk (VaR) techniques over a period of 16…
Abstract
Purpose
The purpose of this paper is to investigate the default characteristics of Sukuk issues by corporate firms in Malaysia using value-at-risk (VaR) techniques over a period of 16 years from 2000 to 2015 and across nine economic sectors.
Design/methodology/approach
The paper employs non-parametric and Monte Carlo simulations to estimate Sukuk defaults.
Findings
The authors analyses revealed that the VaR predictions were fairly consistent with the ratings provided by credit rating agencies, despite the limited tradability of Sukuk in the secondary market. The study was able to demonstrate that Sukuk is not riskier than conventional bonds in the Malaysian context.
Research limitations/implications
The research findings suggested that VaR values will depend on the fundamental value of a firm based on the considerations of market, credit and operational risk. It does not rely on the type of debt instrument, whether a Sukuk or conventional bonds.
Practical implications
The use of Sukuk along with conventional bonds as debt instruments creates opportunities for investors and bond issuers globally.
Originality/value
Although Sukuk has generated much interest among financial market players, studies are lacking on how to predict Sukuk defaults and whether Sukuk has the same risk profile compared to conventional bonds.
Details
Keywords
Rashedul Hasan, Abu Umar Faruq Ahmad and Tamiza Parveen
The key purpose of this study is to make awareness for faithful Muslims who are interested to invest in Islamic capital markets so as to enable them making right decision while…
Abstract
Purpose
The key purpose of this study is to make awareness for faithful Muslims who are interested to invest in Islamic capital markets so as to enable them making right decision while considering investment in Sukuk over conventional interest-bearing bonds.
Design/methodology/approach
This study reviews past literature to analyse contemporary Sukuk risks and discusses several mechanisms to mitigate those risks.
Findings
The study shows that Sukuk can be good alternatives to conventional bonds. Sukuk structures need to be further developed to fulfil the Sharīʿah compliance requirements.
Research limitations/implications
This study is exploratory in nature, and as such, it seeks to identify the risks related to Sukuk issuance. Given this limitation, it did not provide empirical evidences relating to any specific category of Sukuk risks.
Practical implications
An in-depth knowledge of Sukuk risks would help both academicians and investors understand the potential problems related to Sukuk structures and take precautions in the early stage to prevent causes of being defaulted or bankrupt.
Originality/value
The risks related to Sukuk have been explored in all potential roots. This study has offered some significant techniques to prevent the relevant risks for investors’ benefits. Information being provided throughout this study is expected to serve potential investors in Sukuk as a guide to make right decisions and enable them to minimise the risk to secure healthy returns on their investments.
Details