A Comparative Study of Islamic Fiscal Instrument Securitization from History to the Modern Age

Abstract

In the heyday of Islam, esham attested as a fiscal instrument to raise funds from the public. The Ottoman Empire developed esham for facing a crisis after the war defeat. Esham became the milestone for the presence of the world's first Islamic securitization. In Islamic modern ages, sukuk grows as one of the blooming Islamic financial instruments globally and has become a new investment alternative that promises a return that is safe, competitive, and sharia compliant. Historians mentioned that esham is actually the origin of sukuk. The sukuk that is known today is actually a form of modern esham and cash waqf. In Indonesia, cash waqf that is placed on a sukuk becomes a new fiscal instrument. Through cash waqf-linked sukuk (CWLS), the public can contribute to national development as well as do waqf for social projects, and the fund will be returned at the maturity date. Overall, this chapter provides an overview of these three Islamic fiscal instrument securitizations as alternative sustainable financing to face the challenges in public economics in the globalization era.

Integrating Green Sukuk and Cash Waqf Linked Sukuk, the Blended Islamic Finance of Fiscal Instrument in Indonesia: A Proposed Model for Fighting Climate Change

“…Although MoF takes a while almost two years to issue the first CWLS despite it has launched since 2018, Musari (2022) confirmed that MoF remain committed to address CWLS as a productive waqf engine in Indonesia. The issuance of the CWLS is a form of the GoI's commitment to support the development of social investment and the development of productive waqf.…”

“…Although esham in the fact is dissimilar with sukuk, Çizakça (2014b) mentioned that esham practice is closer to a perpetual sukuk in modern language. Musari (2022) highlighted that Islamic financial engineering should develop an instrument that does not only meet sharia principles and is able to help the state finance to meet the fiscal needs. However, the instrument must also not create new debt that burdens the state.…”

“…Therefore, this paper proposes Perpetual Green CWLS as Islamic green financing alternative. This scheme is the development of a number of schemes that have been previously developed by by Musari (2021Musari ( , 2022 and Musari & Sayah (2021). By integrating Green Sukuk, CWLS, and Esham principles, Perpetual Green CWLS is expected to improve the weaknesses that exist in the instrument that formed it.…”

Examining the Purchase Intentions of Indonesian Investors for Green Sukuk

“…As a globally important economy in Asia, Indonesia is engaged in an economic inclusion strategy to achieve inclusive growth and sustainable development [2,3]. This country has a great opportunity to achieve the SDGs through the potential of Islamic finance, especially focusing on climate change.…”