In all societies, there is some group of owner’s funds and cash savings who don’t have any desire or ability to invest directly in profitable economic activities. On the other hand, many entrepreneurs with knowledge, experience and potential do not have the financial resources required for investment. Money and capital markets with using a variety of financial instruments, play a significant intermediary role between these two groups.

The main goals of Central Asset Management company are establishment and management SPVs, in order to facilitate the implementation of intermediary actions".

Muzara’ Sukuk (Farm-letting Sukuk)

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  • Monday, 13 June 2016 08:30

Muzara' Sukuk are the securities that are designed based on Muzara' contracts. The issuer of Muzara' Sukuk transfers the Sukuk and collects the money paid by the applicants of these Sukuk and then purchases arable lands using this money. It then transfers these lands to horticulturists on behalf of the owners of Sukuk and based on the Muzara' contract so that they work on them. The harvest will be distributed at the end of cultivation year. In Muzara' Sukuk, the owners play the role of landowners, the issuer has the role of the owners' attorney, and the horticulturist has the role of agent (farmer) in the Muzara' Sukuk. Muzara' Sukuk are the deeds of joint ownership of Sukuk-owners of certain arable lands.
Muzara', as a term, refers to a contract by which one of the parties gives a piece of arable land for a certain period of time to another party so that he works on it and then the harvest will be distributed among them as stated in the agreement. Muzara' contracts do not have any conditions saying that the landholder must personally own the land, thus the attorney of the owner or a person who has rented the profits of the land for a number of years could transfer the land to the agent (farmer) on a Muzara' contract. Similar successful financial instruments could be designed based on Musaqah contracts, similar to Muzara' contracts, and be used in the Islamic capital market.