Sharia compliant or Islamic finance is a form of financing based on principles of and prohibitions under Sharia or Islamic law. These principles and prohibitions are derived from various sources, details of which are set out in Sources of Sharia

This Practice Note sets out the key principles and prohibitions by which Islamic finance transactions are structured. In practice, whether or not an Islamic finance transaction adheres to these principles and meets requirements so as to be considered Sharia compliant is a decision that will fall to the Sharia board of the financial institution providing or arranging the finance and, less often, the Sharia board of any corporate entity utilising the finance. In general, the default position is that a transaction structured as Sharia compliant or Islamic will be allowed unless it crosses or breaches key principles or thresholds. For further details, see Key Participants in the Islamic Finance Industry