“With-profits” Bonds as Modern Islamic Financial Instruments versus Lease Bonds

With-profits bond is one of the modern financial instruments in Islamic system of finance. The issuer of these bonds will be able to offer benefits or future services to the holders of the bonds while maintaining the original durable property. Therefore, the holders of these bonds will be able to present the benefits and future services with ease of mind upon accumulation of small capitals to expand this business. On the other hand, the holders of these bonds will enjoy future benefits and services upon a purposeful program and with cheaper prices. They will be also able to transfer their rights in financial markets. Lease bond is another Islamic financial instrument, the holders of which share the joint ownership of the property as is. The resulting benefit is thus distributed according to the lease contract among the issuers or owners of the bonds. Due to some similarities in these two types of bonds, some have mistakenly hypothesized that lease bonds shall cover the advantages of with-profits bonds. This paper has resorted to library research method to review the nature and structure of with-profits bonds to highlight the need for issuing these bonds in comparison with the lease bonds.