UK property development has been given an ethical boost with the launch of Autarky Sukuk, a programme of asset-backed securities that comply with Sharia principles.
Autarky Capital Sukuk Plc, a type of asset-based security structured along Sharia finance values, aims to provide a choice for high-net-worth and sophisticated investors looking for an ethical way to generate returns.
According to the founders, the proceeds from investments in the Sukuk will enable Autarky to supply funding to provide capital for the purchase, refurbishment or development of residential or commercial properties in the UK.
Autarky intends to partner with external organisations and, through the donation of a portion of fees generated under the programme, support charities on a project-by-project basis.
It is the perfect time to make Sukuks a mainstream option for ethical investors in the UK.Shoaib BuxThis will ensure all money donated is being used to support what the founders have called “real change on the ground”.
The UK became the first Western country to issue a sovereign Sukuk in 2014 and Islamic banking assets have since burgeoned.
According to the London Stock Exchange Group, Islamic banking assets totalled $2.8trn (£2.3trn) in in 2021, and are projected to hit $4trn by 2026.
Shoaib Bux, co-founder with Yasin Patel at Autarky Sukuk, said: “We believe the Autarky Capital Sukuk programme will contribute to the increase in desire for ethical investment opportunities.
“It is the perfect time to make Sukuks a mainstream option for ethical investors in the UK.”
Advised clients
Bux also told FTAdviser: “The introduction of Islamic finance options on the market has given advisers and their customers food for thought.
“While the natural disposition of many may be to dismiss Islamic finance options, as they are not of the Islamic faith, the alignment of ethical values with shari’ah principles is changing those perceptions.”
According to Bux, for clients looking at ethical investment opportunities, the introduction of Autarky’s Sukuk on to the market bolsters the options they have available.
He explained: “Autarky’s Sukuk are bound by Sharia law, and as such, are unable to partner or invest money into projects that are not morally and ethically sound.
“By the Sharia principles, no money invested in the Sukuk will be reinvested into harmful industries such as pornography, alcohol, gambling or arms and any default payments or penalties are directly donated to charity.
“This is in addition to the regular donation to charities based on a percentage taken from shared profit. An advocate for social responsibility and sustainability, the Sukuk promotes the UN’s Sustainable Development Goals by following these Islamic principles of transparency and fairness.”
Each funding transaction is priced individually, with the client’s experience, credit risk and liquidity dynamics of the property fully considered.
How it works:
- Sukuk is a type of asset-based security structured to comply with Sharia principles.
- Autarky’s Sukuk uses a Wakala-based structure, in which an agent is appointed to invest the proceeds of the Sukuk issuance on behalf of the sukuk holders.
- Under this arrangement, Autarky issues ‘Trust Certificates’ to investors and uses the proceeds to invest in a portfolio of Shari’ah compliant assets. The portfolio of assets invested in with the proceeds is held in trust for the benefit of the Trust Certificate holders.
- The Company, as agent, manages the assets on behalf of the Sukuk holders and distributes the profits to them in accordance with the terms of the Sukuk.
- Commodity Murabaha Receivables are amounts payable to Autarky by clients in respect of funding made available to them to finance the acquisition and/or development and/or refurbishment of real estate.
- The funding is made available by Autarky to a client through a Sharia compliant financing structure, whereby commodities are sold to the client at their cost price plus an additional mark-up, but on deferred payment terms.
- The Autarky client is contractually obliged to pay the cost price and mark-up on the specified date(s) which amounts are the Murabaha receivables.
- To ensure Sharia compliance, sales and transfers of the Trust Certificates are restricted under their terms where a required tangible to intangible asset ratio is not met at any time.
Patel commented: “The growing demand for ethical investment opportunities has led to a surge in the number of available products on the market.
“Where many of these products merely tick-boxes to be labelled as ethical options, Autarky’s Sukuk is structured to be Sharia compliant, making it an overtly ethical solution available to those of Islamic faith, and not.
“We are looking forward to helping our investors improve both their ethical and social impact, and to supporting the continued growth of Sukuk’s and wider ethical investment opportunities in the UK.”