Introduction To Islamic Finance - Part II

Key Points:
Although these structures share some common features, many variations of such structures exist and transactions are often bespoke. As a consequence those first to access this market in Australia will potentially set the domestic standard.

In our previous article we introduced the general principles and prohibitions¹ of Islamic Finance and several of the most prevalent financing structures found in Shariah-compliant transactions. It is these structures, ijara, murabaha, musharaka, mudaraba and istisna'a, which we consider in more detail in this article.

Structure 1 - the Ijara

An ijara is the sale of the right to use and benefit from an asset for a specified period in return for specified consideration. It is referable to a conventional operating lease whereby a customer (lessee) may lease the use and benefit of an asset for a specified rental period in return for a rental fee. An ijara arrangement can be structured to include a sale of the