SPVs Involved Sukuk Issuances in Iran Capital Market

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  • Saturday, 28 December 2019 11:10

The history of Islamic securities Issuance in Iran dates back to 1994 when Tehran Municipality issued 43 million USD participation paper (named as Musharakah Securities). The Law for the Issuance of Participation Papers was enacted by Iran’s Parliament in 1997.

Before passing The Securities Market Act (SMA) of the Islamic Republic of Iran in 2005, financial instruments in the Iranian capital market were restricted to only common stocks, share rights, depository receipts, and participation papers. Since enactment of the SMA in 2005 and The Law for Development of New Financial Instruments and Institutions in 2009, dramatic changes have taken place in the Iranian capital market such as establishing the Securities and Exchange Organization (SEO) as the sole regulatory and supervisory authority to the market, establishment of Shariah Board of the SEO as an unified and independent shariah governance body, establishment of new financial institutions and issuance of new financial instruments, to name but a few. The ratification of different kinds of Sukuk (such as Ijarah, Murabaha, Istisna, Standard Parallel Salam, Manfa’ah (Usufruct), mortgage-backed, and discounting debt sukuk by the Shariah Board, has made them prominent and dominant instruments for financing and investing. In essence, Sukuks have been used, applying different underlying assets such as tangible assets and financial assets (like stock as underlying assets of Ijarah Sukuk) to finance public and private sectors.


Apart from Participation Papers (Musharakah Securities), the first Sukuk was issued in the Iranian capital market on March 12, 2011, worth 297,500 million IRR to finance Mahan Air. The underlying contract was Ijarah and its structure was based on sale and lease back. Since 2011, the Iranian capital Market has witnessed 48 issuances of Ijarah Sukuk cumulatively worth 175,585,149 million IRR.

In addition, the first Murabaha Sukuk was issued on March 16, 2013, worth 301,306 million IRR. So far, Murabaha sukuk has been issued 18 times worth 85,945,306 million IRR cumulatively.

On March 6, 2018, Iran’s government issued the first Manfa’ah (Usufruct) Sukuk worth 30,000,000 million IRR. The structure has been used 9 times worth 222,000,000 million IRR cumulatively.

Mortgage-backed Sukuk which stems from Murabaha loans provided by different banks (particularly Maskan Bank that is a dedicated bank for housing loans) to their customers has been issued 3 times worth 8,087,205 million IRR as a means of financing for banks or corporations.

Regarding other Sukuk structures, Istisna Sukuk was issued only once on November 23, 2015, worth 54 million USD and asset-backed (Dayn) Sukuk was issued on June 18, 2019, worth 3.2 million USD.

Besides issuing Sukuk in the capital market, there are some other Islamic instruments in the market such as Islamic Treasury Bills issued by the government to settle its debts to contractors. Actually, the government gives securities (called Islamic Treasury Bill) to contractors, whose amount equals what the government owes. Contractors can either hold them to maturity (at most for one year) or can sell it at discount in the secondary market. Contractors must not be part of the government (or affiliated to the government).

Structural Break-up of Sukuk Issued by SPVs in Iran Capital Market


Although the Iranian Islamic Capital Market is dominated by the issuance of stock and Sukuk, there are always innovative ways to foster its development. Using Islamic contracts or combination of contracts to resolve needs of the market has emerged from the interaction between the SEO and the Shariah Board.

As an untapped market, the Iranian Islamic Capital Market enjoys plenty of unique potential to rival other Islamic markets in terms of diversity, depth, and return. Our market is promising for the entire Muslim and non-Muslim investors around the world to have a safe, secure, and high-yielding investment.