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Shari'ah Finance and the Equipment Leasing Industry

BY Jonathan Fleisher
November 30, 2007

Shari'ah or Islamic-compliant financing is gaining a foothold in international finance transactions. As the investment community becomes more global in nature, there is an increased demand for Shari'ah compliant transactions. The equipment finance industry is one of the few sectors in the finance world that could enter this market without having to significantly modify the way it does business or its documentation. The opportunities are twofold: First, they involve providing a financial product to a growing market segment; and, secondly, they involve providing access to capital to fund transactions.

This article provides an overview to equipment finance professionals as to certain opportunities that may exist within this market for both increasing customer base and obtaining sources of capital. This is by no means a definitive or exhaustive work but, at best, an introduction to certain of the basic concepts underlying Shari'ah finance. It will become apparent that while there are some concepts that are clear, there is much debate as to what is and is not allowed. It should also be noted that the author, while being knowledgeable about equipment finance law in North America, is not a Shari'ah scholar but merely has a broad understanding of certain of the basic ideas. As such, nothing in this article should be relied upon without an in-depth review by a Shari'ah scholar.

Basic Shari'ah Principles

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