Partnership Based Sukuk Model in Environmental and Social Investments

Mehmet Sarac and Esma Karabulut

Journal of BRSA Banking and Financial Markets, 2021, vol. 15, issue 1, 27-59

Abstract: The stakeholder approach, just distribution of wealth and preservation of the environment are essential in Islamic economics. In short, a market economy that is not harmful for social goals is achieved through Islamic understanding. One of the fundamentals of Islamic finance is adopting the profit and loss sharing-based financial tools. That is why that the musharakah and mudarabah are the two essential contracts that Islamic financial institutions should focus on. In order to show how green investment and good governence, two essential elements of sustainability of which the importance and necessity have been accepted by today’s dominant economic development and financing manner are inherent in Islamic finance, three sukuk models, namely “Continuous Musharakah-Based Sukuk”, “Diminishing Musharakah-Based Sukuk” and “Hybrid Sukuk” of which the major portion consists of Musharakah and minor portion consists of Ýjarah” are proposed in this study for financing a wind power plant. The rationale behind proposing three alternative models is to consider the variability of the conditions in the country and business cycles. Modus operandies and benefits of the models are explained in detail along with the prospective difficulties in the implementation and solutions.

Keywords: Islamic finance; Socially respective investing; Environmental investment; Green sukuk; Partnership-based sukuk. (search for similar items in EconPapers)
JEL-codes: G2 G32 M14 O16 Q5 (search for similar items in EconPapers)
Date: 2021
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