Islamic Finance and the Modern World; the Legal Principles Governing Islamic Finance in International Trade

Abstract

Islamic law or Shari’a purports to govern all aspects of the private and public life of the believers. Its all-embracing character is the constant narrative of Islam as a religion and a civilization. While Shari’a does not address finance in its modern meaning, it does incorporate general principles governing the economic behaviour of the Islamic society and specific instruments regulating classic commercial transactions. Thus, Islamic banks are unable to use conventional methods of financing and seek to provide Shari’a compliant alternatives to the services rendered by western banks. They use a different paradigm of financing, namely asset based financing and employ the well defined structure of nominated contracts in Islamic law. This paper would look in some detail to the structure of Islamic Finance instruments and the practical and theoretical implication of the growth of this method of financing for the western lawyers. More specifically the paper seeks to present a concise analysis of the place of Islamic Finance in English Law.