An Islamic SBL is an alternative to conventional SBL. It is developed to mirror SBL the closest by producing similar or better economic results. The point of an iSBL is to facilitate creation and redemption of iETF. It involves outright sale of stocks and employs the supporting Shariah contract of “wa’ad” (unilateral promise/undertaking).
According to SAC of SC, SBL can be allowed based on contract of “ijarah” (leasing) with certain exemption from the general ruling on ijarah, based on the concept of istihsan (juristic preference). General rulings: Selling of borrowed/leased share nullify the ijarah. Exemption does not nullify the ijarah. But several other issues have been a concern of modern jurists.
- iSSB involves sale of securities in the 1st leg on deferred payment terms and buy back of securities in the 2nd leg
- Wa’ad is made from one party to another to secure the 2nd leg transaction (to protect Bursa’s interest)
- Rights of Approved Supplier and PDs are embedded in regulations – i.e. for CFA to buy from PDs and sell to Approved Supplier