Al Baraka Bank Sukuk 2025

Al Baraka Bank Sukuk 2025

Proceeds from Albaraka Sukuk Ltd. will be allocated into two portions in which fifty one percent (51%) of the proceeds will be used to purchase the Initial Asset Portfolio from Albaraka pursuant to the Initial Asset Portfolio Sale and Purchase Agreement; and forty nine percent (49%) will be used to purchase Commodities from the Supplier, which will be subsequently sold to Albaraka pursuant to the Initial Murabaha Contract entered into pursuant to the Murabaha Agreement.


  • WHAT IS A SUKUK? Sukuk is Arabic for investment certificates, issued for the purpose of raising money for utilisation within a corporation or Government entity. In essence, Sukuk is a Shariah-compliant investment and attractive alternative to conventional bonds, and may be used to raise capital or liquidity, depending on the need of the Entity raising the funds.In 2014 the South African National Treasury successfully concluded a US$500 million Sukuk issuance in international capital markets, in spite of the concept’s relative obscurity in South Africa as a viable investments vehicle.In 2016 Durban-based Al Baraka Bank became the first South African financial institution to issue a Tier 2 Sukuk, raising R200 million from the retail market, capacitating the bank to target a broader market.
  • WHY A SUKUK? Based on the capital structure of the funds required, such funds could have been raised via a share capital issuance and/or an equity/debt instrument. The Sukuk met the equity/debt characteristics forregultory, tax and accounting purposes, as well as Shariah requirements, and was, therefore, regarded as the most appropriate structure for the type of capital Al Baraka Bank was looking to raise.Islam’s prohibition of interest prevents Muslims and Islamic financial institutions from investing in interest-bearing bonds. However, in the case of Sukuk, income streams and terminal values are not guaranteed, because Sukuk represents an undivided share in the ownership of the underlying asset, meaning that generated income streams and terminal values are dependent on the underlying asset’s performance.
  • WHAT MAKES A SUKUK DIFFERENT FROM A CONVENTIONAL BOND? The shariah-complaint structure of the instrument is the main differentiator. The Islamic banking model used is Mudaraba, which is a profit-sharing model. The contributors of funds are Sukuk-holders and normal depositors, while the Bank is the applier of skills. The Bank finances assets for customers and makes a profit on the sale of these assets. It then shares the profit with Sukuk-holders and depositors in line with a pre-defined ratio, retaining a share for itself.
  • WHO IS ABLE TO INVEST IN SUKUK? As with all Al Baraka Bank products, the Sukuk is not restricted to Muslims, but is available to all.
  • WHAT DIFFERENCE DOES SUKUK MAKE?
    • For the South African consumer, this is a new form or investment into a debt/equity instrument and is one which offers a higher return paid to the investor. This creates an additional choice within the investment market and enables investors to add a diversification component to their portfolio.
    • For the Bank, this creates a new source of capital, compared against its traditional source of Share Capital.
    • For the economy, this mode of capital-raising (via Sukuk) may be effectively utilised to tap Shariah funds globally for other local capital-intensive projects or requirements.