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Maket Developments Securitization in Malaysia

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Maket Developments Securitization in Malaysia

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4)Securitization of Musharakah can be used for:
-Construction of Projects and factories
-Expansion Projects
-Working Capital Finance

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3)After the projects is started,these Musharakah certificates can be treated as negotiable instruments

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2) Every subscriber can be given a Musharakah certificate,which represents his proportionate ownership in the assets of the Musyarakah

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1) Musharakah is a mode of financing which can be securitized easily.

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7)Credit enhancer

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6)Rating agency

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6) rating agency

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5)Investment bankers

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4)Trust

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3)Special Purpose Vehicle
(SPV)

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2)Servicer

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1)Originator

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4) The use of securitization will bring in much needed liquidity to Institutions, enabing Islamic institution to free part of their capital which is tied up with these illiquid project and finance activities.

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3)It prefer to buy equipment and lease it to project promoter,instead providing him with liquid capital against payment of interest.

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2)The use of murabahah contract enables the Islamic institution to purchase certain goods and sell the same to client at pre-agreed profit margin rather than given interest bearing loan to the client.

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1) Asset backed securitization is the right product for Islamic institution to relate finance to asset as long as asset structured accordance to Islamic principles.

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4) Better and more resilient credit rating

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3)Create instrument to match investment objectives

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2) Great moral responsibility

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1) Better security

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4)Risk management

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3)Enables better utilization of resources

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2)Improving balance sheet structure - improving capital utilization,release capital

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1)Efficient funding-lower cost,alternative investor based

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-Most Islamic bonds issued in Malaysia have been structured using Bai-Bithaman Ajil(deferred-payment sale) contracts,under which financing the sale of an asset is on a deferred installment basis with a pre-agreed payment period.

-The sale price will also include an agreed mark-up

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-Has nothing to do with the actual business undertaken with the borrowed money.

-The bond stands for a loan repayable to the holder in any case,and mostly with interested

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-Represent the direct pro rata ownership of the holder in the assets of the project.

-If all the assets of the joint project are in liquid form,the certificate will represent a certain proportion of money owned by the project.

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Differences between Musyarakah and Conventional Bond

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Differences between Musyarakah and Conventional Bond

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In the event of a business loss,the loss is borne fully by the provider of the capital

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Profit sharing based on a pre-agreed ratio to be mutually agreed by both parties

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One party solely contributes its entrepreneurial efforts while the other solely provides capital.

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-Require that a registered Sharia'a law advisory must be appointed to advise the issuer on the Sharia'a law aspects of the issuance of any Islamic bonds,including the documentation,structure and any investment.
-The Securities Commission is responsible for approving the transaction and approval is generally given within 14 days of receipt of the relevant documentation from the issuer

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-The transaction must comply with the IS guideliness which set out the Sharia'a principles and concepts that have been approved by the Shariah Advisory Council of the Securities Commission.
-That asset securitisation is permissible if the underlying asset is Sharia'a law-compliant.

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Guideliness on the offering of Islamic securities

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Guideliness on the offering of Islamic securities

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5. a information memorandum containing the specific information required by the ABS guidelines must be made available to investors

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4. the SPV must be resident in Malaysia for tax purposes

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3. the originator must be an entity incorporated in Malaysia

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2. the underlying asset must generate cashflow.

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1. asset-backed securities may not be converted into equity.

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3. Application within 28 days of the submission of the application if the application is in order and all other regulatory approvals have been obtained.
The

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2. Aplication will contain a declaration of compliance with the requirements set out in the ABS, PDS and IS Guidelines (if applicable), a preliminary rating report, a true sale legal opinion and a valuation report (if applicable to the asset class

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1.  submit an application to the Securities Commission for approval

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Guidelines on the offering of asset-backed security

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Guidelines on the offering of asset-backed security

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1. Residential mortgage backed securities(MBS)
2. Asset Backed Securities (ABS)
3. Collateralized debt Obligation
4. Commercial mortgage backed securities
5. Future flow securitization

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collateralised bond obligations (‘CBOs’) and collateralised loan obligations (‘CLOs’)

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residential mortgages credit card receivables,

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commercial properties

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Auto-loan receivables

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- The ABS Guidelines, together with the guidelines on the offering of private debt securities (the ‘PDS Guidelines’) which were issued in 2000

-( The PDS Guidelines)  offering of structured products which were issued in 2003

-provide originators and arranging banks with an essential step-by-step guide to the regulatory approval process for securitisation transactions.

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Background of Securitization in Malaysia

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Background of Securitization in Malaysia

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- Securitisation activity in Malaysia only really started in 2001

-Securities Commission established the regulatory framework for securitisation by publishing guidelines on the offering of asset-backed debt securities (the ‘ABS Guidelines

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Issuing certificates of ownership, against an asset, investment pool or business enterprise