 We shall continue with our conversation on criticisms on Islamic modes of finance. And as I said previously, these criticisms are indirectly on Islamic banking and finance as well. In this module, we shall look at a criticism with reference to the practice of Sukuk. You might have read in newspapers, in books, online, elsewhere. Many a times people, the writers, journalists, they refer to Sukuk as an Islamic bond. Because people understand this Islamic bond language, even myself. I know there are huge differences between Sukuk and a bond. But for simplicity to make the people understood, many a times I use the term Islamic bond as well. However, a Sukuk is not an Islamic bond. It is an investment certificate which might have some characteristics of debt and some characteristics of equity. Before this criticism, let me tell you an interesting story. Once I was going back from Heathrow Airport to home. I came from somewhere and this car driver, who was an English guy, white guy, he was driving me back home and we started a conversation. And he asked me, so what do you do? I said, I'm an Islamic finance expert. And he said, oh, my son is an Islamic finance expert as well. And I said, oh really? And he said, oh, he works for the law firm so and so. And he is in the Islamic finance team of the law firm. And I said, okay, what's his name? And he gave me the name and I knew the guy. And then he said, I am actually impressed that our government has issued a Sukuk. And I said, Sukuk, what is a Sukuk? And he said, actually, I thought this is the right pronunciation because before this, I thought that this was Sukuk. S-U-K-U-K. So now people, they can have a lot of perceptions, understandings of these alien words. Sukuk is an Arabic word and a lot of people, they may not know. Even the Arabs, they may not know true meaning of a Sukuk until you explain to them. Now, many people, they say that Sukuk is a big sham. It's a fraud as there is no true sale happening in the Sukuk structures. It is just a conventional bond named as Sukuk. This is a criticism which I believe is based on this word bond which has been used in the media excessively. And this bond thing, actually when Investmentdar issued a Sukuk on a transaction in UK, Financial Times actually came up with this caption, bond arrives in Islamic finance. And the reference was to James Bond 007. Now, on a serious note, let us come to this criticism. So those who criticize Sukuk on this basis, they say that as there is no recourse to the asset in case of a default, i.e. when the obligor defaults the Sukuk holders, they cannot get hold of the asset to sell it to cover their money. Because this is not possible, there is no true sale and hence, Islamic finance guys coming up with Sukuk structures, they have a fraud in the car. This is entirely wrong. This is not a true observation. This is true that most of the Sukuk do not provide full recourse to the underlying asset to the Sukuk holders in case there is a default. But this is actually a kind of expectation of the Sukuk holders. They do not want to have recourse to the asset. This is a very, very important point. This recourse to the asset becomes relevant only when there is a problem with the transaction, i.e. the obligor is not paying the due amount. Otherwise, if the transaction is honkidory, everything is fine, Sukuk holders are not interested in having recourse to the asset. So, we must look at the intentions of the parties involved. Now, this is also a big criticism of the Islamic banking. People say that the intentions are not right for the banks and their other parties involved like shareholders and so on. Now, I don't know where this conversation came from. Let us look at the intentions once again. We previously looked at intentions and we found that intentions were valid. Let us see, in this case, what are the intentions? Now, intention basically is very simple. That one party wants to provide financing to the other one and that other one is seeking financing in a Sharia-compliant way. Now, in a Sukuk structure, what happens? This party seeking finance would sell that asset to an SP. The Sukuk holders would put that money into that SPV by way of buying Sukuk. Now, this money which has come from the Sukuk investor would go to the obligor and the obligor would receive a return. This is the intention. Now, if this is an intention, then it is a valid intention. One party is seeking financing on a Sharia-compliant way by way of selling an asset to a third party. And this whole mechanism generates this financing facility. Now, according to Sharia, people who say that the sale doesn't take place. According to Sharia, the sale actually does take place in the event or in the context of Sukuk. When the price has been paid, the asset has been put into the custody of an agent, custodian appointed by the Sukuk holders. The sale has taken place. This is also true that there is not sufficient legal protection for the buyer in this case. Legal protection comes with registering the product with a competent legal authority. That doesn't take place in case of Sukuk. Why? Because at the end of the day, the expectation is that the obligor is going to buy back this asset after some time. So, going to the land registry and spending some money at that time and then buying it back and paying the land registry fee again, this would increase the cost of issuing Sukuk. So, in the event of default, when there is no sufficient legal protection available, the case of course goes to court and this is heard by a common law judge. Most, I think 99% of the global Sukuk transactions, they are written in an English law context, which is a common law example. Now, common law is very liberal. It is said that whatever you have decided, you will decide according to that. Now, when the case goes to the court, the judge sees that the sale has taken place. This party has paid the price and the asset has gone into this SPV. So, he sees that the register has not taken place. So, he says, why didn't you register? He says that we didn't register or we didn't want to register. The judge would at best say, you silly boys, you should have got this asset registered. Now, that you haven't done it. So, it doesn't mean that the sale hasn't taken place. So, the judge would come up with a decision based on the fact that the sale has taken place. This is what happens in all the common law jurisdictions. So, even the English law says that the sale has taken place. So, the people who say that the sale is not true, they don't have the correct observation. In case of Sukuk, the sale takes place from a Sharia viewpoint. And when a judge is asked to rule on that sale, the judge would say that actually the sale has taken place. It's only that it hasn't been registered. The number of Sukuk cases that have gone to the English courts has been the judge's decision. Now, the judge says that the sale takes place. If you say that it doesn't happen, then this is your own opinion.