Transferable ’Ijarah Warrants

Definition of "Transferable ’Ijarah Warrants"

A proposed financial instrument for the government. The government can issue these warrants in favour of private parties, giving them the right to develop such assets as rivers, waterways, motor ways, minefields, dams, etc. These parties can develop these assets and then avail of the usufruct for a limited period (say 20–30 years) to reclaim their costs. During this period, the assets will remain leased to these parties and the government will get a certain flow of income from them. The holders of these warrants will be able to sell them in the mar- ket at the going market price that will be a function of the income flowing from these assets. After the lease period, the assets will return to the government. These warrants are also termed as ‘transferable ’Ijarah Warrants with Build Operate Transfer Arrangement’. Another variant of the warrants is as follows. It is possible that a legal entity is brought into being for collecting the funds by sale of these warrants and then develop the asset. In this case the financiers would only be buying the rights to the usufruct of the asset by agreeing to pay the capital cost as well as maintenance cost in instalments. These instalments would be considered as rent of the asset for a specified period. The holders of the asset would be able to recover their investment by selling the usufruct of the asset, such as electricity of a hydroelectric dam. The holders of the warrants would be able to trade them in the market at the going price. This variant of the warrants is called Transferable ’Ijarah Warrants with Finance–Lease–Transfer Arrangement.