This fatwa defines a shari'a bond as a long-term security based on shari'a principles issued by a public company to an investor (bond-holder) that obliges the company to pay to the investor a fee and repay investment funds at a maturity date. A convertible mudharabah shari'a bond is a shari'a bond issued by a public company based on mudharabah principles for the purpose of complementing its work capital requirements, with the option that the investor can co …
The public company issuing convertible mudharabah shari'a bonds is the mudharib (manager of funds), while the bond-holder is the shahibul mal (investor). In the event the bond-holder exercises its right to convert its bonds into shares in the company, it will do so pursuant to a musyarakah agreement, where the bond-holder becomes a share-holder.