Islamic Finance Practice Guide

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Overview

This Guide provides a practical insight on Islamic finance and in particular looks at the:

  • Nature and scope of Sharia.

  • Sources of Sharia.

  • Key principles of Islamic finance.

  • Basics of Sharia complaint financing.

  • Key participants in the Islamic finance market.

  • Key Islamic finance transaction structures.

Definitions

  • IFSB: Islamic Financial Services Board.

  • AAOIFI: Accounting and Auditing Organisation for Islamic Financial Institutions.

  • IFIs: Islamic financial institutions.

Islamic finance framework

Sharia or Islamic law is the legal system of the religion of Islam that sets out a system of duties or code of conduct for individuals to follow so that they may live their life in a fulfilling and beneficial manner.

Although the phrase ‘Islamic law' is widely used, Sharia is often the preferred term to demarcate from Western or Christian concepts of ‘law' and associated assumptions, for example:

  • the Sharia is inherently non-secular and does not distinguish between religious and governmental institutions, authorities and ordinances;

  • the Sharia is both a legal system and a moral framework, rather than, for example, a legal system underpinned or influenced by a moral framework; and

  • the Sharia regulates both public and private spheres.