THE APPLICATION OF TANĀZUL AND ITS SHARĪ'AH ISSUES IN EQUITY-BASED ṢUKŪK

Abstract

There are number of product innovations in Islamic capital market instruments particularly in Ṣukūk using the equity based contract; mushārakah, mudārabah and wakālah bi al istithmar. Within the Islamic parameter of these contracts, there is not to be determination of return or possible arrangement for these that may lead to guaranteeing the return of any partners in mushārakah and muḍārabah. Conventional bond usually offers a fixed income determination for their bond structures and issuance. This raises issue as to whether the ṣukūk equity based structure may have the same implication. This is where the tanāzul may play its role to give effect in ṣukūk structuring using mushārakah, muḍārabah and wakālah bi al istithmar contracts to offer a similar feature of fixed income instrument. This paper attempts to ascertain the status of tanāzul in equity based ṣukūk from the Shariah perspective. The paper will analyze the use of the concept of tanāzul in ṣukūk structures and its implications on the validity of the equity based ṣukūk transactions.