{"id":1970,"date":"2023-02-09T08:48:33","date_gmt":"2023-02-09T08:48:33","guid":{"rendered":"https:\/\/ahmedlawfirm.com\/?page_id=1970"},"modified":"2023-03-01T11:01:52","modified_gmt":"2023-03-01T11:01:52","slug":"islamic-finance-4","status":"publish","type":"page","link":"https:\/\/ahmedlawfirm.com\/index.php\/islamic-finance-4\/","title":{"rendered":"Islamic Finance"},"content":{"rendered":"<section class=\"wpb-content-wrapper\"><p>[vc_row][vc_column css=&#8221;.vc_custom_1675849323970{border-right-width: 3px !important;border-left-width: 3px !important;border-left-color: #e3e3e3 !important;border-left-style: solid !important;border-right-color: #e3e3e3 !important;border-right-style: solid !important;}&#8221;]\n\t\t\t<!-- START Jewellery1 REVOLUTION SLIDER 6.6.10 --><p class=\"rs-p-wp-fix\"><\/p>\n\t\t\t<rs-module-wrap id=\"rev_slider_43_1_wrapper\" data-source=\"gallery\" style=\"visibility:hidden;background:transparent;padding:0;margin:0px auto;margin-top:0;margin-bottom:0;\">\n\t\t\t\t<rs-module id=\"rev_slider_43_1\" style=\"\" data-version=\"6.6.10\">\n\t\t\t\t\t<rs-slides style=\"overflow: hidden; 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color: #750b17;\"><strong>\u00a0 \u00a0 \u00a0DUBAI<\/strong><\/p>\n<ul>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/businesscommercial-corporate-law\/\">Business\/Commercial &amp; Corporate Law<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/?page_id=1867&amp;preview=true\">New Businesses &amp; Entrepreneurial Law<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/businesscommercial-corporate-law-2\/\">Labor &amp; Employment Law<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/real-estate-3\/\">Real Estate<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/construction-law-3\/\">Construction Law<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/islamic-finance-3\/\">Islamic Finance<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/litigation-arbitration-3\/\">Litigation &amp; Arbitration<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/intellectual-property-3\/\">Intellectual Property<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/ksa-saudi-arabia-law-2\/\">KSA\/Saudi Arabia Law<\/a><\/li>\n<li><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/power-of-attorney-2\/\">Power of Attorney<\/a><\/li>\n<\/ul>\n<div class=\"sidebartitle\"><strong style=\"text-align: left; color: #750b17;\">\u00a0 \u00a0 \u00a0 BOSTON<\/strong><\/div>\n<ul>\n<li class=\"first\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/business-commercial-corporate-law-2\/\">Business\/Commercial &amp; Corporate Law<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/new-businesses-and-entrepreneurial-law-2\/\">New Businesses and Entrepreneurial Law<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/labor-employment-law-3\/\">Labor &amp; Employment Law<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/real-estate-4\/\">Real Estate<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/construction-law-4\/\">Construction Law<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/islamic-finance-4\/\">Islamic Finance<\/a><\/li>\n<li class=\"\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/litigation-arbitration-4\/\">Litigation &amp; Arbitration<\/a><\/li>\n<li class=\"last\"><a href=\"https:\/\/ahmedlawfirm.com\/index.php\/intellectual-property-4\/\">Intellectual Property<\/a><\/li>\n<\/ul>\n<p><!--more-->[\/vc_column_text][\/vc_column_inner][vc_column_inner width=&#8221;3\/5&#8243;][vc_custom_heading text=&#8221;ISLAMIC FINANCE&#8221; font_container=&#8221;tag:h4|text_align:left|color:%23750b17&#8243; google_fonts=&#8221;font_family:Arimo%3Aregular%2Citalic%2C700%2C700italic|font_style:700%20bold%20regular%3A700%3Anormal&#8221;][vc_column_text]<\/p>\n<div class=\"main-container\">\n<div id=\"content\">\n<div class=\"content-area\">\n<div class=\"content-cont\">\n<div class=\"practice-right\">\n<p align=\"JUSTIFY\"><strong>Islamic Finance<\/strong><\/p>\n<p align=\"JUSTIFY\">Islamic Finance has seen exponential growth in recent decades. With the rise of the economies of the Middle East, particularly the Gulf Arab countries, demand for Islamically-compliant tools for investment and financing has also increased. The Islamic Finance industry is now estimated to be worth more than $2 trillion dollars globally. The UAE serves as a major hub of Islamic Finance.<\/p>\n<p align=\"JUSTIFY\"><strong>What is Islamic Finance?<\/strong><\/p>\n<p align=\"JUSTIFY\">Islamic Finance and Islamic banking started in earnest in the 1970s. Primarily driven by oil rich Gulf countries, Islamic finance has grown exponentially. According to the IMF, there are over 300 Islamic financial institutions in more than 75 countries with total assets worldwide exceeding 250 billion and growth rates exceeding 15 percent a year. As of 2010, there were an estimated 473 Islamic mutual funds with billions of dollars worth of assets.<\/p>\n<p align=\"JUSTIFY\">The chief feature of Islamic finance law is the prohibition against interest and usury (<i>riba<\/i>) and excessive uncertainty and risk (<i>gharar<\/i>) in business. Literally,\u00a0<i>riba<\/i>\u00a0means excess or addition, but is usually translated as interest, usury, and unlawful gain.\u00a0<i>Gharar<\/i>\u00a0means doubt or uncertainty, but in Islamic finance it is defined as\u00a0<i>excessive<\/i>\u00a0uncertainty in a business transaction.<\/p>\n<p align=\"JUSTIFY\">There is a scholarly consensus that riba is not just usury, but rather any kind of fixed predetermined rate of return on an investment that is guaranteed no matter how the investment performs. The prohibition of riba also applies to trading in gold, silver and certain foodstuffs. This is so because metals cannot be used as an end run around the prohibition on interest by having trades in these metals or commodities in unequal measure. By prohibiting riba, Islamic finance encourages risk on both sides of a transaction.<\/p>\n<p align=\"JUSTIFY\">The other key prohibition in Islamic finance is the prohibition against\u00a0<i>gharar<\/i>. Basically, the risk of violating the prohibition on Gharar would exist any time there is excessive uncertainty in a transaction or if an entity is actually trading in risk. However,\u00a0<i>gharar<\/i>\u00a0is not unequivocally forbidden like interest. Scholars look at the degree of uncertainty, the risk involved, and the potential for injustice to any of the parties involved. Along with prohibitions against\u00a0<i>riba<\/i>\u00a0and\u00a0<i>gharar<\/i>, the financing of certain activities (including gambling, the manufacturing or distribution of alcohol, pork, and pornography) are also prohibited.<\/p>\n<p align=\"JUSTIFY\">Islamic Finance provides the public with the option of avoiding prohibitions on interest and uncertainty when it comes to financing a transaction or making an investment. In many instances, modern Islamic finance involves taking pre-modern Islamic commercial contracts and molding them to meet modern financial needs. Below are some examples.<\/p>\n<p align=\"JUSTIFY\"><strong>Conventional Islamic Finance Instruments<\/strong><\/p>\n<p align=\"JUSTIFY\"><strong><i>Murabaha<\/i><\/strong><\/p>\n<p align=\"JUSTIFY\">A\u00a0<i>murahaba<\/i>\u00a0transaction is an unconditional sales contract where the cost price of the goods, mark-up over the cost, and payment date are all clearly defined in the contract. However, the\u00a0<i>murabaha<\/i>\u00a0contract is not a typical sale on credit contract. Islamic law requires that the object of sale must be in existence at the time of the contract. This requirement has been put in place in order to avoid the prohibition against\u00a0<i>gharar<\/i>.<\/p>\n<p align=\"JUSTIFY\"><i>Murahaba<\/i>-based financing occurs when a bank purchases goods for a certain amount from a third party seller, then resells the goods to a borrower at a mark-up over the cost price. The sale is immediate and the payment by the borrower is deferred and is payable in installments. The\u00a0<i>murahaba<\/i>\u00a0transaction therefore helps the borrower raise money without violating the prohibition against interest and allows the bank to earn money in form of the fee and the mark-up.<\/p>\n<p align=\"JUSTIFY\"><strong><i>Ijara<\/i><\/strong><\/p>\n<p align=\"JUSTIFY\">An\u00a0<i>ijara<\/i>\u00a0transaction is basically a lease by which intermediate to long-term financing of assets is facilitated. Under Islamic law, only tangible, non-perishable, identifiable, and quantifiable assets may be leased. Consequently, money, food, and fuel cannot be leased.<\/p>\n<p align=\"JUSTIFY\">An\u00a0<i>ijara<\/i>\u00a0transaction occurs where there is a lease of assets or services with, under which there is a transfer of a usufruct for rent consideration. In an\u00a0<i>ijara<\/i>\u00a0transaction, the lessor is expected to maintain legal and beneficial ownership, bear the associated risk, and assume all costs of purchase (and transport, if applicable) associated with the deal. In order to convert the\u00a0<i>ijara<\/i>\u00a0into a traditional finance lease, the parties may include a put option or an irrevocable unilateral promise to purchase. The lessee is responsible for the rental payments and eventual purchase of the property if a put option has been put in place.<\/p>\n<p align=\"JUSTIFY\"><strong><i>Musharaka<\/i>\u00a0and\u00a0<i>Mudaraba<\/i><\/strong><\/p>\n<p align=\"JUSTIFY\"><i>Musharaka<\/i>\u00a0and\u00a0<i>mudaraba<\/i>\u00a0are two partnership-based Islamic finance modelts that involve profit and loss sharing. Risk is more evenly spread among the parties, and income is not guaranteed for any one party. Returns for a financier genuinely depends on the success of the venture. Generally, financiers take an active role in the venture in order to ensure profitability.<\/p>\n<p align=\"JUSTIFY\">A\u00a0<i>mudaraba<\/i>\u00a0transaction occurs where the financier contributes capital to a partnership and the borrower, or\u00a0<i>mudarib<\/i>, contributes their efforts (usually in the form of management expertise). The management expertise provided by the\u00a0<i>mudarib<\/i>\u00a0is treated as a form of capital for the purposes of the partnership. The financier is therefore generally not an active partner. Profits are pre-agreed and shared in accordance with each party\u2019s contributions. A loss would mean that the financier loses its capital and the mudarib is not compensate for his or her efforts\/time. The\u00a0<i>mudarib<\/i>\u00a0is not liable to the financier for any losses.<\/p>\n<p align=\"JUSTIFY\">A\u00a0<i>musharaka<\/i>\u00a0transaction is similar to a\u00a0<i>mudaraba<\/i>, with the key difference being that, in a\u00a0<i>musharaka<\/i>, both parties generally contribute capital.<\/p>\n<p align=\"JUSTIFY\">The demand for Islamic financial instruments is growing across the globe. We advise clients on how to maintain compliance under Islamic law for complex investment and financing transactions. From property acquisitions to project finance, our expertise in Islamic Finance allows us to help clients achieve their commercial goals while conforming to ethical parameters of financing under Islamic law.<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p>[\/vc_column_text][\/vc_column_inner][\/vc_row_inner][\/vc_column][\/vc_row]<\/p>\n<\/section>","protected":false},"excerpt":{"rendered":"<p>[vc_row][vc_column css=&#8221;.vc_custom_1675849323970{border-right-width: 3px !important;border-left-width: 3px !important;border-left-color: #e3e3e3 !important;border-left-style: solid !important;border-right-color: #e3e3e3 !important;border-right-style: solid !important;}&#8221;][\/vc_column][\/vc_row][vc_row][vc_column css=&#8221;.vc_custom_1675849278951{border-right-width: 3px !important;border-bottom-width: 3px !important;border-left-width: 3px<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"footnotes":""},"class_list":["post-1970","page","type-page","status-publish","hentry"],"_links":{"self":[{"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/pages\/1970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/comments?post=1970"}],"version-history":[{"count":6,"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/pages\/1970\/revisions"}],"predecessor-version":[{"id":2345,"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/pages\/1970\/revisions\/2345"}],"wp:attachment":[{"href":"https:\/\/ahmedlawfirm.com\/index.php\/wp-json\/wp\/v2\/media?parent=1970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}