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Lease Certificates: A Case Study Using a Turkey Experience

Author

Listed:
  • Murat KASIMOĞLU

    (Istanbul Commerce University, Faculty of Management, Istanbul, Turkey)

  • Feyzullah YETGİN

    (Istanbul Commerce University, Faculty of Management, Istanbul, Turkey)

  • Ali KÜÇÜKÇOLAK

    (Istanbul Commerce University, Faculty of Management, Istanbul, Turkey)

Abstract

The purpose of this study is to explore and discuss the international practices of “sukuk” (lease certificate) issuance and the local experiences in Turkey. In addition, a sukuk issuance in Turkey has been analyzed as a case study, after which a recommendation list is prepared for potential issuers. The functions of the ijara sukuk issuance and sales processes, which are used extensively in practice, and the establishment and characteristics of the Special Purpose Vehicle (SPV) have also been examined. The aim is to reduce the reservations of private sector companies and increase their knowledge levels to effectively utilize the issuance of sukuk in growth financing. The major difficulties in Turkey and other countries’ practices have also been discussed. These issues involve the use of investor rights in case of default after issuance, SPV management, liquidity of sukuks, reference price, risk management, and compliance with the Basel capital and liquidity regulations. In this work, we examined a lease certificate that was issued by a manufacturing company in a scale of SME in 2013. In the case study, the general company structure, production, sales, and business structure of the issuer company were examined. The collateral structure and working methods with international finance and credit insurance institutions were analyzed, along with the measures required for protecting the rights of the investors. Results indicated the advantages and difficulties of sukuk issuance as well as the importance of business plans and scenario analysis, collateral requirements of investors, preparation for legal and financial due diligence processes, and the conduct of an independent audit.

Suggested Citation

  • Murat KASIMOĞLU & Feyzullah YETGİN & Ali KÜÇÜKÇOLAK, 2018. "Lease Certificates: A Case Study Using a Turkey Experience," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 68(1), pages 1-44, June.
    • Handle: RePEc:ist:journl:v:68:y:2018:i:1:p:1-44
    DOI: 10.26650/ISTJECON414489
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    References listed on IDEAS

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    1. Abdullah Saeed & Omar Salah, 2012. "History of Sukuk: Pragmatic and Idealist Approaches to Structuring Sukuk," Chapters, in: Mohamed Ariff & Munawar Iqbal & Shamsher Mohamad (ed.), The Islamic Debt Market for Sukuk Securities, chapter 3, Edward Elgar Publishing.
    2. Nassar H. Saidi, 2012. "Stylized Facts About Islamic Sukuk Markets," Chapters, in: Mohamed Ariff & Munawar Iqbal & Shamsher Mohamad (ed.), The Islamic Debt Market for Sukuk Securities, chapter 9, Edward Elgar Publishing.
    3. Alfred Kammer & Mohamed Norat & Marco Pinon & Ananthakrishnan Prasad & Christopher M Towe & Zeine Zeidane, 2015. "Islamic Finance; Opportunities, Challenges, and Policy Options," IMF Staff Discussion Notes 15/5, International Monetary Fund.
    4. Mohamed Ariff & Munawar Iqbal & Shamsher Mohamad (ed.), 2012. "The Islamic Debt Market for Sukuk Securities," Books, Edward Elgar Publishing, number 14550.
    5. Michael T. Skully, 2012. "Securitization Issues and Islamic Financial Products with Reference to Sukuk," Chapters, in: Mohamed Ariff & Munawar Iqbal & Shamsher Mohamad (ed.), The Islamic Debt Market for Sukuk Securities, chapter 8, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Lease certificate; sukuk; Islamic finance;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General

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