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Original Post Date: 2010-06-09 Time: 06:00:02 Posted By: News Poster
Sheikh Ziyaad Muhammad is an Islamic finance scholar from South Africa. He is the founder and CEO of the Islamic Finance Institute of South Africa (IFISA), the only dedicated Islamic finance training institute in Africa. He has also published numerous works on Islamic Insurance, mathematics, science and accounting. He is currently training Nigerians on how to float Islamic bond called Sukuk. The training is organised by the Nigeria’s Metropolitan Skills Ltd.
What aspect of Islamic financing are you teaching Nigerians?
My training programme here is focused on structuring Islamic investment on the basis of Sukuk. Sukuk is an Islamic bond where you have a minimum amount of risk in an investment that is tradable in the market place and representing divided share in a project or in an asset. So we would be training participants at this workshop on how to structure these bonds from the Shariah perspective.
The reason is that Islamic bonds cannot be invested in impermissible projects. Conventional bonds are impermissible. Government bonds and treasury bonds are illegal in the Shariah because there are interest rates that are linked to them and they are risk free. Therefore it is considered as haram or impermissible in Islam.
What about risk and return on investments?
You make sure that the investment is in the real asset. The investment is not based on money only, but what the money will be used for should be spelt out. The risk and the return are thereby shared based on your investment. There is no interest on return. The risk is also very low, depending on the structure of the Sukuk. Now, you can use this profit rather than interest. As you know in Islam profit is acceptable but interest prohibited.
In conventional bonds, returns are usually fixed. How is it under Sukuk?
Under the Islamic bond system, returns are generally not fixed; but Sukuk can provide you with an ‘Indicator Rate.’ You share the profit and loss because you share the risk and reward. If you want more reward then you must put in more risk. The principle is quite different with conventional bonds. In conventional bonds, it doesn’t matter what happens to the underline projects.
How would you convince Nigerians that subscribing to Islamic bond is superior to the conventional bond?
There is always a misconception that a fixed or guaranteed return is the ultimate when it comes to stability. But we have been quickly brought to reality by the global economic recession. This happened because of some big problems in some western financial institutions. One company lost $600billion. When they floated the bonds, they would tell you that it is impossible to lose but what happened, you lost. Islamic Sukuk now says why do you fool yourself.
There is always a risk. There is always a chance of you collapsing. And now you have all these conventional institutions collapsing. So therefore Sukuk is definitely very stable. If you look at these conventional bonds, it is unstable because their asset is not real. They work only on money. If you look at treasury bonds, they based on something that might happen or might not happen. It might be or might not be a project. You cannot enter into a Sukuk until the asset is ready. So, you must have real tangible assets. So, to make it attractive we say this is more of a real investment as opposed to a conventional investment that is just based on mere calculations.
What about maturity period?
Here, it is not any different. It may be five year or twenty years bond. It can even be listed on the bond exchange because it has all the criteria of a bond.
Is this being practised in other countries?
Sukuk is probably the most successful Islamic finance instrument in the world today. If you go to the Middle East, you will see that the Dubai International Airport is rebuilt through Sukuk. Emirate Airline has expanded its fleet on the basis of Sukuk. Dubai has also used Sukuk to grow its much attractive property. Saudi Arabia and Malaysia are also advanced in Sukuk. They have issued billion and billions of dollars based on Sukuk. The question should be why Nigeria has not started practising Sukuk. Britain has Sukuk and Germany, where there are only three million Muslims, has Sukuk. And even South Africa where there about 1.2million Muslims have Sukuk but Nigeria that has 70million Muslims has no Sukuk. In fact, Nigeria has no Islamic banking. It can be practiced in Nigerians because it can be listed on the bond exchange.
In your view, why is it that it is yet to start in Nigeria?
I can’t say. It may be regulatory problem for Islamic financing to thrive. But what I have seen in this country is that there is a serious need for Islamic financing and instrument like Sukuk.
How can this training help ginger Nigerians to Islamic financing?
It will. This is so because there are central bank officials and investment bankers as well as other financial operators and regulators. It is very lucrative instrument in that it can attract foreign investments from Middle East, especially those who want to invest only in Shariah products. The return will not be only for the Middle Easterns but also for Nigerians
Original Source: 
Original date published: 8 June 2010
Source: http://allafrica.com/stories/201006090076.html?viewall=1