The main differences between asset-based and asset-backed ṣukūk
| Categories | Asset-based ṣukūk | Asset-backed ṣukūk |
|---|---|---|
| Source of Payment | Payment is from originator/obligor’s cash flows | Payment is from the revenue generated by underlying asset |
| Presentation/disclosure of the asset | The asset stays on the balance sheet of originator/obligor | The asset is separated from the originator’s book |
| Types of ṣukūk holder’s ownership | Beneficial ownership but with no right to dispose of the asset | Legal ownership with the right to dispose-off the asset |
| Recourse | Purchase undertaking at par from obligor is the ultimate recourse, which is only to obligor and not the asset | Ṣukūk holders only have recourse to asset, hence asset plays genuine role in defaults |
| Categories | Asset-based | Asset-backed |
|---|---|---|
| Source of Payment | Payment is from originator/obligor’s cash flows | Payment is from the revenue generated by underlying asset |
| Presentation/disclosure of the asset | The asset stays on the balance sheet of originator/obligor | The asset is separated from the originator’s book |
| Types of | Beneficial ownership but with no right to dispose of the asset | Legal ownership with the right to dispose-off the asset |
| Recourse | Purchase undertaking at par from obligor is the ultimate recourse, which is only to obligor and not the asset |
Source(s): Zolfaghari (2017)
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