Sukukinvestment

Mariam Jamilah Abdul Jalil and Zuriah Abdul Rahman

Qualitative Research in Financial Markets, 2012, vol. 4, issue 2/3, 206-227

Abstract: Purpose - The purpose of this paper is to determine whether the amount of profits gained frommusharakah mutanaqisahmodel using coupon rate of 4.5 per cent, price at par and tenure of five years was greater than usingijarahprinciple where the price is at a discount. Also to compute and compare the profits obtained fromsukukinvestment inijarahandmusharakah mutanaqisahfor 3.5 per cent coupon rate and price at par for asukukwith tenure of 12.5, 15, 17.5 and 19 years. Design/methodology/approach - In total, two models were used to calculate profit. These models are based onijarahandmusharakah mutanaqisahprinciples. Formulas are derived fromijarahandmusharakah and mutanaqisahprinciples used insukuk. Findings - Sukukinvestment usingijarahprinciple is found to be a better investment alternative thanmusharakah mutanaqisahprinciple, regardless of the number of years of thesukuk,as long as it is a long‐term tenure. However, for short‐term tenure, the latter is preferred based on the amount of profits generated. Research limitations/implications - The formulas and results shown in this research are just one of the mathematical approaches that can be used for decision making insukukinvestment. There are other approaches which may deemed to be more effective in decision making. This research was applied only toijarahandmusharakah mutanaqisahtypes of investment. Practical implications - The results in the research will assist in making a quick decision on what type ofsukukinvestment for the investors and issuers and which will be suitable given the amount of financial resources and duration of the investment period. Originality/value - Many researchers have attempted to study the implications of using mathematical formulas to guide decision making on the choice ofsukukinvestment and this research has, to a certain extent, concurred with and complemented the works of past researchers. Additionally it will create awareness and provide more information to potential investors on bettersukukinvestment alternative principles from a mathematical point of view.

Keywords: Islam; Finance; Investments; Bonds; Profit; Mathematics; Islamic finance; Islamic bonds; Sukuk; Murabahah; Ijarah; Musharakah mutaniqisah (search for similar items in EconPapers)
Date: 2012
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Persistent link: https://EconPapers.repec.org/RePEc:eme:qrfmpp:v:4:y:2012:i:2/3:p:206-227

DOI: 10.1108/17554171211252538

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