DAIMG Comments on proposed SUKUK Law document-Revised Dec 2023

Comments on Draft Sukuk Law Article 4. Private companies should not be allowed to issue financial (tamveeli) certificates. This may lead to Gharrar (speculation) Article 5. Private companies should not be allowed to issue financial certificates. Article 6. The meaning of “nobels” is not clear (sub-clause 1) (sub-clause 2). Article 6. Meaning of “development projects” is not clear. Which sector does it include? Financial instruments should be issued for financing defense projects as well (sub-clause 4). Article 9. Sub-clause 5 is not clear. Article 12. Sub-clause 1 is not clear. Article 12. Sub-clause 5 “nominal price” indicates that the financial instrument will be tradable during its tenure. We strongly oppose such trading as it will lead to the emergence of money market transactions and capitalist property in the IEA Article 13(2) “and the guarantee of a certain amount is not allowed” is not clear. Article 16. We recommend include “and defense” after “development” in sub-section (1) of article 16. Article 18. The condition “having professional experience of at least three years” should be omitted. Article 20. Sub-clause (2) the word “resulting provisions” is not clear. It is not clear what will be the payment to the financial instrument holder. In our opinion the payment of the financial instrument should consist of an annual amount related to the actual profit of the projects in which the funds obtained by the financial instrument has been invested. Article 20. Sub-clause 4. “interested parties” is not clear. Article 20. We recommend that sub-clause 6 be omitted. We recommend nationalization of all banks and financial institutions and their consolidation into a single national commercial bank (publicly owned). This single national commercial bank should act as the sole agent of DAB in all financial instrument related transactions. (Article 21). We recommend that collecting investment funds and distributing the profits etc. be the sole responsibility of the branches of the single publicly owned commercial bank. (Article 22 clause 5) We recommend that the price of the financial instrument be fixed at the time of issue but annual profit of its investment should be paid.. (Article 22 sub-section 8) We recommend that “murabaha” be excluded from the list of Sharia contracts. (Article 23 clause 2) Article 24. The meaning of “nobels” is not clear. We recommend omission of sub-clause 2 of article 22 Article 23. All types of financial contracts mentioned in this article (except murabaha) are valid in our opinion but it must be assured that these are not traded during the period of tenure and that annual profits are paid on the basis of the earnings on these instruments. Add “nationalized” before banking system in article 25. Article 30. We recommend that the payment schedule should be annual. (clause 1) We strongly recommend that the financial instruments are not traded in a secondary market. If this is done a capital market will appear in Afghanistan and speculation (gharrar) will be the main determinant of the spot price of the financial instrument. This will inevitably lead to the emergence of capitalist property in the IEA. Therefore we recommend omission of clause 3 of Article 31.

We recommend omission of sub-clause 4 and 5 of Article 31. Financial instruments should not be traded during their period of tenure as this will lead to gharrar. Exposure of these instruments to foreign secondary markets will integrate and subordinate the Afghan monetary system to imperialist finance and this will penetrate the Afghan economy with both riba and gharrar. We do not recommend the issuance of private Sukuk (Article 32 clause 3) Article 35(1) Add “and Sharia” at the end of sub-clause. General Summary DAIMG proposes: That financial instruments be issued by DAB (through a nationalized banking system) and public sector organizations for financing development and especially defense projects. The financial instruments issued in the IEA should be called “Tamveeli Amanat”. The yield from “Tamveeli Amanat” should consist of 1) the actual amount invested at time of issue 2) profit earned during period of tenure. Tamveeli Amanat instruments should not be tradable during the tenure period to avoid the influence of gharrar (speculation) in the determination of their spot prices. There should be no bond market in Afghanistan as this will inevitably lead to the dominance of gharrar (speculation) and riba within the monetary/credit system and the emergence of capitalist property in Afghanistan. Tamveeli Amanat instruments must not be transacted through global secondary markets as this will inevitably subordinate the Afghan monetary system to imperialist finance. Murabaha should not be used as a financing mode as this has led to the hidden interpretation by riba of the financial transaction of Islamic banks in Pakistan. We thank you for allowing us to comment on the draft of Sukuk Law. Note :: Detailed proposals for issuing financial (tamweeli) instruments by DAB and other public sector organizations have been given in the DAIMG submission “Developing a planning system for IEA “