Abstract
In a newly released report titled, “Global Islamic Finance Jurisdictions” by KFH Research Limited, Islamic finance is seen to be rapidly expanding across the global financial system with as many as 600 financial institutions across 75 countries offering Islamic law compliant products and services. As like any other industry or sector wherein Islamic finance has permeated, the global shipping industry too has reaped the benefits of an ever increasing interest in Shariah compliant finance products and services. The aim of this chapter is to introduce to the reader the basic concepts of Shariah based lending (e.g. riba, gharar, maysir etc.), the popular methods of Islamic finance utilised currently by various ship owners and ship finance institutions (e.g. ijara, murabaha, sukuk etc.) and a brief analysis of the risks associated with each method of financing thereof. The chapter ends with a listing of certain considerations, which are unique to Islamic finance that must be borne in mind by anyone who chooses to be involved in an Islamic finance transaction.
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Notes
- 1.
- 2.
See also Ernst & Young’s World Islamic Banking Competitiveness Report 2013.
- 3.
- 4.
Quoting the source: “A business activity will be ethical if it promotes good in the society. We use the same logic to determine the ethicality of transactions and activities of Islamic banks. Specifically, activity of an Islamic bank would be ethical when it enhances welfare (maslahah) and morality of individuals in the society. On the contrary, any banking practice that produces adverse effects on either welfare or Islamic morals would be considered unethical”.
- 5.
- 6.
The requirement for payment to charity stems from the fact that pecuniary penalties or “default interest” is prohibited in Sharia’a. However, to compel the borrower to adhere to the terms of the Ijara agreement, such mechanisms of compulsory payment(s) for charitable purposes in case of a default are greatly helpful as a deterrent.
- 7.
See also http://www.bt.com.bn/home_news/2009/04/02/local_industries_drawing_ foreign_business_interest.
- 8.
See also http://www.ameinfo.com/90484.html.
- 9.
See also http://www.ameinfo.com/160841.html.
- 10.
- 11.
- 12.
See Sect. 18.3.2.
- 13.
See also Shamil Bank of Bahrain v Beximco Pharmaceuticals Ltd and others (2004), www.bailii.org/ew/cases/EWCA/Civ/2004/19.html.
- 14.
“Within Sunni and Shi’a Islam, there are six main schools of Islamic law—fiqh:
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Sunni schools:
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The Hanbali School is named after Ahmad Ibn Hanbal (d. 855)
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The Hanafi School is named after Abu Hanifa (d. 767)
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The Shafi’i is named after al-Shafi’i (d. 819)
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The Maliki is named after Anas bin Malik (d. 795)
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Shi’a schools:
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The Zaydi School is named after Zayd Ibn Ali (d. 740)
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The Ja’fari School is named after Ja’far al-Sadiq (d. 765)
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There was a sweeping range of opinion in the first three centuries of Islamic history, and at one point, there were over 100 different schools of thought”. Quoted from www.maslaha.org/untold-islam/schools-of-islamic-law-and-their-differences.
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- 15.
See also www.aaoifi.com.
- 16.
See also www.mifc.com.
- 17.
The Banker, Top 500 Islamic Financial Institutions 2011.
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Joseph, N. (2015). Islamic Finance in Shipping: Dawn of a New Reality. In: Schinas, O., Grau, C., Johns, M. (eds) HSBA Handbook on Ship Finance. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-43410-9_18
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