Islamic finance is an attractive alternative to clients who only considered conventional financing techniques for their real estate transactions.  Our lawyers are well versed in Islamic Law and the cultural requirements that may come with it.  Contact us at 631.838.0178 to set up a consultation, or email us at sardar@sardarlawfirm.com.

How does this affect you?

• Buying a store/car
• Financing a business venture

• Structuring a private equity deal

Shar’iah recognizes conventional finance principles including concepts of agency and delegation, custodial and bailment arrangements, security for obligations, and guarantors.  Shar’iah compliant transactions come in multiple forms, including the following:

Ijara:  Lease

Ijara is much like a conventional lease agreement where an asset is made available in exchange for rent.  The leased asset must have some value and continue to exist throughout the term of the lease.  If it no longer exists or has lost all economic value, the ijara terminates. The amount and/or method for determining the rent must be specified.  However, parties may choose to specify a method which produces variable results, such as rent based on the value of gold in a particular time period.

Murabaha:  Mark-Up Financing

A murabaha is a three-party sale arrangement where a financier-intermediary purchases goods from a supplier and sells them to an consumer/end-user at a deferred price that is marked-up to include the intermediary’s profit margin. The mark-up  is justified under Shar’iah principles since the intermediary takes title to the goods and accepts the commercial risk of their ownership for the period of possession.

Musharaka:  Partnership

This is a partnership arrangement in which each partner shares in the profits or losses of a specified venture. In a musharaka, partners may allocate profits in an agreed upon manner but they may not be entitled to a pre-determined fixed profit to ensure fairness in the business process.  The allocation of losses is not subject to contract because partners are required to share in losses per their capital contributions.  This is to ensure that partners take fiscal responsbility of the business risks.

Contact us at 631.838.0178 to set up a consultation, or email us at sardar@sardarlawfirm.com.

Select SLF Publications on Islamic Law:

Structuring Business Part II:  From Partnership to Ownership through Islamic Finance – Sheheryar T. Sardar, Partner & Benish Shah

Structuring Business in an Economic Downturn: Part I:  Islamic Financing through a Joint Venture –Sheheryar T. Sardar, Partner & Benish Shah