Humairaa Mayet | 22 November 2018
Al Baraka Bank, a leading South African Islamic banking institute, has become the first in South Africa to issue a tier two capital sukuk. A sukuk is essentially a shari’ah compliant bond and was developed as an alternative to government issued and institutional bonds; neither of which are permissible in Islam.
Speaking to Ebrahim Gangat on Salaamedia, Abdullah Ameed, financial director of Al Baraka explained the concept of sukuk and elaborated on its specifics. Ameed described sukuk as being a “mudhaaraba agreement”- one in which an array of assets will be financed, with returns being shared between the bank and the investors.
Ameed asserted that tier two capital is not unique to Islamic financial structures, but a banking related instrument which has been altered to fit into the confines of shari’ah.
According to Ameed, 94 individuals and institutions have invested in sukuks, which have a minimum investment value of R1 million- a total of R 200 million has been accumulated thus far. Ameed claimed that the sukuks will mature at a rate of approximately 10% per annum over 10 years. In the interim a trading desk will be established by the bank through which sukuk holders can sell their sukuks to willing buyers.
Over the past 29 years, Al Baraka bank has grown exponentially, moving from a financing bank to a commercial bank, providing a wide range of services for accoun tholders and investors. Unit trusts in which Al Baraka partnered with Old Mutual, transactional banking products, and the provision of foreign exchange at a commission rate of 0% are amongst the bank’s most notable successes.