Sukuk al-salam

Glossary

Also known as salam sukuk and bai salam sukuk. A form of sukuk derived from the bai al-salam financing structure. In a sukuk al-salam:

The entity seeking capital (originator) enters into a sale and purchase agreement with a special purpose vehicle (SPV).
Under the terms of the agreement, the originator agrees to sell assets to the SPV for deferred delivery but the SPV pays the purchase price in advance.
The SPV finances the purchase of these assets with the proceeds of a sukuk issuance.
The SPV holds the assets in trust for the sukuk holders who each own a proportionate interest in the assets in accordance with the value of their investment.
The SPV then either leases or sells the purchased assets to the originator or an affiliate of the originator.
The SPV uses the lease payments or purchase price to make payments to the sukuk holders.

A sukuk al-salam transaction must also satisfy all the requirements of a salam transaction.

For a diagram showing the structure of a typical sukuk al-salam transaction, see Islamic Finance Deal Structure: Sukuk al-salam.

For more information on Islamic finance in the US, see Practice Notes:

For more information on Islamic finance in the UK, see Practice notes:

Sukuk al-salam | Practical Law