How is Islamic Finance different to conventional finance

Unlike conventional Finance, Islamic banks operate without interest (riba), which is forbidden in Islam. Islamic law considers money to have no intrinsic value. It is a medium of exchange but not an asset. Money must therefore be converted into an asset to be useful.

Is Islamic Finance ethical

Islamic Finance is an ethical alternative to conventional finance as clients know that their money will never be invested in industries prohibited by Shariah such as tobacco, alcohol, pornography, gambling or arms. Islamic lenders must always act in the best interests of their customers and society.

Islamic Finance in the commercial real estate market

The main products used for commercial real estate financing are the Murabaha and Commodity Murabaha products.

In a Murabaha transaction, the financier will purchase the property from the seller, and then sell the property to the customer (for the cost price together with a mark-up), either on a deferred payment basis or with an agreed payment schedule.
In a Commodity Murabaha transaction, the financier does not acquire the property but instead purchases commodities which are then sold to the customer before being sold by the customer to a third party (the customer receives the capital they require from the third party and is left owing to the financier the cost price together with a mark-up).

We’re here to help, get in touch

Whether you are acquiring or refinancing your commercial property, our Islamic Finance experts will advise you on the legal complexities and collaborate with specialist lenders to provide the best protection and advice.

Farooq Zar, Partner
FarooqZar@schofieldsweeney.co.uk
Tel. 01274 350 817