Ainul Azura Zakiyudin on SRI Sukuk

What do we know about SRI Sukuk?

The SRI Sukuk, or the Sustainable and Responsible Investment Sukuk, is another investing platform which the call for the Sukuk proceed is to be used for the preservation and protection of society.

The SRI Sukuk opens a new era for the Islamic Finance and complements the arising of green bonds and social impact bonds that also promotes the sustainable and responsible investing, globally.

What is the difference of normal sukuk and SRI Sukuk?

The SRI sukuk is very much similar to the normal sukuk, where there’s issuer raise sukuk to get capital while the investor will receive coupon payment.

The only difference is that the issuance of SRI Sukuk is meant for social impact projects such as education, green energy, or health program.

In Malaysia, the Securities Commission (SC) had on August 2014 released its Sustainable Responsible Investment Sukuk Framework to facilitate the financing of sustainable and responsible investment initiatives in order to promote socially responsible financing and investment.

It is part of the SC initiatives to create the conducive ecosystem for the investor and the issuer of the sukuk. Allow me to talk a bit about Sukuk Ihsan.

Sukuk Ihsan by Khazanah Nasional Berhad

SRI Sukuk - Sukuk Ihsan by Khazanah Nasional Berhad

Khazanah Nasional Berhad in Malaysia, has on May 2015 launched the first ringgit denominated sustainable and responsible investment sukuk called Sukuk Ihsan to raise funds for its trust school program under Yayasan Amir.

Amanie Advisors is proud to be part of the team, together with CIMB Investment Bank, as the joint Shariah advisor in structuring the Sukuk Ihsan.

The structure is in accordance with the Islamic principle of wakalah bil istithmar with at least 33% of the sukuk proceed is invested in tangible asset.

The Sukuk Ihsan is designed as a pay-for-success structure which is measured by a set of predetermined Key Performance Indicator, or KPI, which are assessed over a 5 years observation time frame.

If the KPIs are fully met at its maturity date, the Sukuk holders agree to forgo or contribute up to 6.22% of the nominal value due under the sukuk as part of the sukuk holders’ social obligation in recognizing the positive social impact generated by the trust school program.

On the other hand, if the KPIs are not or partially not met, the sukuk holders will receive up to the nominal value due under the sukuk as agreed at the issuance.

Another interesting feature of the Sukuk Ihsan is that the sukuk holder has the option to convert their investment in the sukuk into a donation at any point in time during the sukuk tenure.

The SRI Sukuk is indeed a noble yet powerful concept that invites awareness and responsiveness of the corporate sector to participate in the development of the wellness of the society especially in several major areas such as education, environment, health, power energy, and more.

We hope that Sukuk Ihsan will be the opening of more SRI Sukuk, not only in Malaysia, but globally.

Perhaps, soon, there will be a SRI Retail Sukuk where more parties are able to participate in such a noble project.

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