Trade Flows: Understanding the Sharia Dynamics of Trade Finance

Overview of Trade Finance Trade finance plays a crucial role in facilitating international trade by mitigating risks and providing funding solutions for importers and exporters. This document explores selected conventional trade finance products, their Shariah compliance, and alternative Islamic trade finance instruments. Conventional Trade Finance Products Conventional trade finance products include letters of credit (LCs), […]

Capital Goods Finance: Unlocking Intelligent Value with Ijara

A meticulously detailed image of an open oyster shell with two pearls nestled inside, symbolizing the growth and potential of Shariah-compliant Capital Goods Financing. The lustrous pearls reflect the ethical investment and prosperity principles of Ijara and Ijara-wa-iqtina, akin to the natural, valuable assets cultivated within the oyster shell.

Introduction to Capital Goods Finance Capital Goods Financing (CGF) is widely considered as an essential financial tool used by businesses for acquiring capital goods necessary for growth and expansion. It elaborates on different forms of CGF, including Ijara and Ijara-wa-iqtina, which are compliant with Islamic Shariah principles. What is Capital Goods Finance? CGF is a […]

Hedging Profit Rate Risk:
Navigating the Rough Seas With
Sharia Compliant Strategies

Man sailing in sea with Lighthouse

Balancing the Unique Risks The foundation of Islamic banking lies in participation and not in simple financial intermediation. The range of risks may be considered greater in Islamic banking due to their participation as a partner, investor, buyer and seller, as compared to the status of lender in conventional banking. While they share major risks […]

Hedging Currency Risk: Restoring Balance with Sharia Values

An overview of FX risks Currencies fluctuate based on various factors including (but not limited to) monetary policy, inflation, political environment and trade balances. Companies conducting business globally face foreign exchange (FX) risk in three forms: a) transcation exposure from individual deals in foreign currencies; b) translation exposure when converting foreign subsidiaries’ financial statements into […]

Bond Cum Warrants: Can it shift up to the high gear of Sharia compliance?

Preview-image-for-bond-cum-warrant

Conventional Bond  These bonds are fundamentally  loan contracts;  it does not give the investor a share of ownership in the asset project or business. A bond with option rights is called a warrant bond. For a limited time, it confers the right to buy equity securities, such as shares, of the bond issuer at a predetermined price (exercise price). Once […]

Crypto Assets: Zakat of the Digital World

Zakat is the third of five core pillars of Islam and by Quranic ranking, is next after Prayer in importance. Zakat is due on one’s personal assets but is never payable on one’s residence, vehicle, clothing, electronics so on and so forth. Zakat has been made obligatory on specific assets: gold, silver, cash, business stock, […]

Inflation Linked Bonds: Heightening Terrains of Sharia Compliance

What is Inflation linked bonds? An index or inflation linked bond is a bond which has its coupon payments adjusted for inflation by linking the payments to some inflation indicator, such as the Consumer Price Index (CPI) or the Retail Price Index (RPI). These interest-bearing investments typically pay the investors a yield plus accrued inflation, […]

Syndicated Financing: A Granular Look at Sharia Compliance

What is Conventional Syndicated Financing? These are debts issued by a group of lenders to a single borrower. It is the practice of providing a loan by a group of lenders – known as the syndicate – to fund an individual borrower. Under a syndicated loan, lenders are typically big banks, though financial institutions such […]

Mastering The Logic of Sharia Principles in Futures and Forwards

A Derivative is a financial instrument whose value is derived from an underlying asset or group of assets. They are a contract between two or more parties. The value of this contract depends on changes in the value of the asset that the derivative’s value is derived from. Derivatives enable parties to trade specific financial […]

The new buzz in alternative funding

Alternative Finance Alternative finance is an umbrella term that refers to a new financing mechanism that has emerged outside of the traditional financial system and helps connect fundraisers directly with funders often via online platforms or websites. Alternative finance differs to traditional banking or capital market finance through technology enabled ‘disintermediation’, which means utilizing third […]

Crypto Yield Farming: Can the mechanics address Sharia principles?

DeFi is short for “decentralised finance,” an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries[1]. DeFi generally uses peer-to-peer financial services. It involves taking traditional elements of the financial system and replacing the middleman with a smart contract. In layman’s terms, it can also be described […]

Bonds Vs Sukuk: A Longer Term Look with Perpetuity

Assets have value and include real assets and financial assets. Real assets are physical assets such as land, buildings, and gold. Financial assets are claims representing the right to some return or to ownership of physical assets. Tradeable financial assets are also known as securities. A security is a fungible, negotiable financial instrument that holds some type of […]