Definition of Interest-free Sukuk: Interest-free Sukuk are the securities that are issued based on interest-free loan agreements, on the basis of which the issuer owes equal to the face value of the Sukuk to the owners of Sukuk and needs to pay the debt by the maturity date.
Nature of Interest-free Sukuk:
Governments and well-known charity organizations could use Interest-free Sukuk in order to carry out the projects that are in the interest of the public or in order to establish a relationship between the owners of charity funds, who aim to give part of their fund to those in need in form of interest-free aides. Thus the applicants of Interest-free loans could use the financial instruments of Interest-free Sukuk. In other words, the government or charity organizations could issue Interest-free Sukuk with certain maturity dates and collect the extra funds available to charity workers and invest them in certain investment projects or directly give to those in need of Interest-free loans through Interest-free funds or banks. Then, they will pay off the matured Interest-free Sukuk through the annual budget or through collecting the installments on Interest-free loans.