Lease Certificates: A Case Study Using a Turkey Experience

The purpose of this study is to explore and discuss the international practices of “sukuk” (lease certificate) issuance and the local experiences in Turkey. In addition, a sukuk issuance in Turkey has been analyzed as a case study, after which a recommendation list is prepared for potential issuers. The functions of the ijara sukuk issuance and sales processes, which are used extensively in practice, and the establishment and characteristics of the Special Purpose Vehicle (SPV) have also been examined. The aim is to reduce the reservations of private sector companies and increase their knowledge levels to effectively utilize the issuance of sukuk in growth financing. The major difficulties in Turkey and other countries’ practices have also been discussed. These issues involve the use of investor rights in case of default after issuance, SPV management, liquidity of sukuks, reference price, risk management, and compliance with the Basel capital and liquidity regulations. In this work, we examined a lease certificate that was issued by a manufacturing company in a scale of SME in 2013. In the case study, the general company structure, production, sales, and business structure of the issuer company were examined. The collateral structure and working methods with international finance and credit insurance institutions were analyzed, along with the measures required for protecting the rights of the investors. Results indicated the advantages and difficulties of sukuk issuance as well as the importance of business plans and scenario analysis, collateral requirements of investors, preparation for legal and financial due diligence processes, and the conduct of an independent audit.