What is Islamic finance?
Islamic finance is simply a way of doing business that is based upon the ethical principles of Islamic law (Sharia). Sharia is derived from both the Quran and the Sunnah – the teachings, practices and deeds of the Prophet Mohamed (may peace be upon him).The application of Sharia principles is determined through analysis and consensus by Sharia scholars, who opine and give their fatwa (i.e. pronouncement) on the compliance of each financial product / structure with the principles and practices of Islam.
Can anyone do business involving Islamic finance?
Yes. Absolutely any investor can benefit from Sharia compliant financing. Islamic finance is for all investors (both Muslim and non-Muslim) and it is a market that is experiencing rapid growth. In fact, these difficult financial times make the ethical foundations and sensible approach to risk in Islamic financing more attractive than ever.With an estimated 1.4bn Muslims worldwide and increasing interest amongst issuers in tapping the Sharia compliant market for funding, the industry is believed to be growing by at least 15% per annum. Global Sharia compliant assets are estimated to have now exceeded $1trillion and there are over 300 Islamic financial institutions around the world.
Is Islamic finance well established in the UK?
Outside of the Muslim world, the United Kingdom Government has been especially supportive of the industry’s development in London and has enacted tax legislation and regulatory reform to facilitate the use of Sharia compliant structures. The Government has taken a lead amongst western nations in permitting the establishment of a Sharia compliant financial services sector (starting with the authorisation of the Islamic Bank of Britain in 2004). As a result of these measures, the UK Financial Conduct Authority expressed the view that London is emerging as a hub for the Islamic finance industry in its recent paper on the subject (“Islamic Finance in the UK”).
What does Islamic finance allow and forbid?
Transactions must be Halal (permissible), which precludes investments in certain industries (for example, gambling, alcohol, tobacco, pork, insurance and conventional banking).Sharia encourages earning of profit through trade and therefore prohibits any form of interest (Riba). Conventional deposits, loans, overdrafts or bonds are therefore forbidden.
Speculative behaviour or undue uncertainty in a transaction is called Gharar and is forbidden by Sharia. Conditions in a contract should therefore not be subject to future uncertain events that could lead to misunderstandings.It is also not permissible to sell something that one does not already own. Activities such as short selling are therefore prohibited.
What are typical Islamic finance structures?
Transactions should be based upon tangible assets and involve risk-sharing. Sharia compliant structures tend therefore to have some form of collateralization. The classic example of a risk-sharing transaction is an equity investment.
How can I learn more about Islamic finance?
Please contact us in confidence for further details of our services. Tejara Capital, through its access to attractive, distinctive investment opportunities worldwide, its excellent distribution capabilities within the Middle East and its deep expertise in structuring and marketing Sharia compliant products and services, is extremely well positioned to deliver you a world-class service.