The Application of True Sale Contract In Asset-Backed Sukuk

Abstract

This article discusses the concept of true sale and its application in sukuk issuance whereby the existence of this concept is vital to ensure the permissibility of sukuk issuance especially for asset-backed sukuk.  The purpose of this study is to differentiate the application of true sale contract in asset-based and asset-backed sukuk and to examine whether the concept of true sale involved therein is similar to the Shariah concept of sale. Thus the sukuk underlying contracts are analyzed in order to understand the concept and the practice of both asset-based and asset-backed sukuk. Finally, the study found that the true sale contract is really practiced in asset-backed sukuk but not in asset-based sukuk which make the previous comply with the shariah concept of sale whereby the later although did not apply the true sale contract but still the sukuk is comply with shariah rules.