This paper aims to provide a comprehensive study of key Shariah issues associated with two types of sukuk al-ijarah. The first type is sukuk al-ijarah al-muntahiyah bi al-tamlik, i.e. sukuk based on assets that are the subject of lease agreements ending in the transfer of ownership back to the party from whom the assets were originally purchased. The second type is sukuk al-ijarah al-mawsufah fi al-dhimmah, i.e. sukuk based on forward leases. The paper prefaces the discussion on these two types of Sukuk al-ijarah with a critical review of some of the definitions proposed for sukuk al-ijarah, and it proposes a definition inclusive of tangible assets, usufruct and services. It also provides an explanation of the practical challenges faced by corporations in issuing sukuk, particularly with regard to marketing, investor demand, ratings considerations, and legal impediments to ownership of sovereign assets. In exploring the key Shariah issues related to sukuk al-ijarah al-muntahiyah bi al-tamlik, the paper discusses the following: the ownership of the underlying asset for both asset-based and asset-backed sukuk; the obligor selling the asset and its usufruct to the sukuk holders and then turning around and repurchasing the usufruct; and the inclusion of a binding promise by the original seller to buy back the asset after the lease ends. Under sukuk al-ijarah al-mawsufah fi al-dhimmah, the Shariah issues discussed relate to both the issuance and trading of such types of sukuk in which the underlying assets of the forward leases pertain to physical assets and usufructs whose specifications the obligor undertakes to provide.
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