Securitization is a process that has been heavily used by institutions offering Islamic financial services (IIFSs) in substantial volumes for many years, largely for the purposes of cash equivalence and tradability. In other words, Sukukization is process for an immediate liquidation, direct access to capital market, creation of secondary market, and risk segmentation - often referred to simply as sukuk.
The overall process will be arranged or 'securitized' by an SPV (Special Purpose Vehicle) structured by an IIFS. The pronouncement of Sheik Taqi Usmani (2008) declaring the bulk of the Sukuk issued in the market defied Islamic norms has stirred strong emotions. For some, it seemed to be rather hasty, not well-thought out and opposed to the needs of the Islamic capital market. In the view of others, however, it was no less than a very welcome and long overdue breath of fresh air for the industry. Some critics, who questioned the validity of the Sheikh Usmani pronouncement, argued that the personal view goes against the ruling of the Accounting and Auditing Organization for Islamic Finance Institutions (AAOIFI) on the permissibility of sukuk as laid down under its Shari'ah Standard 13 ( Resolution to the Fiqh Academy on Securitization).
The view expressed in this article is that rather than contradicting each other, AAOIFI's Shari'ah Standard 13 on securitization and sukuk real application which is objected by well respected Shari'ah scholars whom are calling for real Sukukization; are actually both in agreement with each other, even though it may not have been explicitly stated.
A closer analysis reveals that the overall structures of sukuk as permitted by AAOIFI are theoretical models that are rarely or virtually never followed by the industry. Realizing this fact, rather than there being any conflict, Shari'ah scholars have simply put forward the same point of view, albeit expressed differently. In other words, their view points out what cannot be done, while AAOIFI reaffirms this and completes the picture by explicitly outlining in AAOIFI Shari'ah Standard 17 what should be done.
