Sector Overview
Islamic finance forms differ in legal structure from conventional financing, and each needs documentation reflecting its actual legal nature, not just a Sharia label applied to a conventional structure.
Any Islamic finance structure is subject to approval by the financing entity's Sharia board, and legal documents need drafting accounting for this approval's requirements alongside general Saudi regulatory requirements.
Regulatory Framework
These transactions fall under general contract provisions in Saudi law, with consideration for Sharia standards set by the financing or issuing entity's Sharia board.
How We Work With This Sector
We determine the most suitable Islamic finance form for the need, and review the draft structure with the Sharia board before finalizing final documents.
Who We Work With in This Sector
Companies preferring Sharia-compliant financing needing legal structuring precisely reflecting this compliance.
Companies planning sukuk issuances needing legal structuring compliant with both Sharia and Saudi regulations.
We notice that some companies requesting Islamic finance structuring retain documents drafted in a conventional financing style with only the terminology changed, which risks the structure being rejected by the Sharia board on review if the actual documentation doesn't reflect the genuine nature of the Sharia transaction, such as an actual transfer of commodity ownership in a murabaha rather than merely a theoretical reference to that transfer.
Related Services for This Sector
This connects directly with our Islamic finance and takaful service.
For sukuk issuances, this connects with our capital markets and securities service.
Common Questions
What's the legal difference between murabaha and conventional financing?
Murabaha rests on selling a commodity for known profit rather than lending an amount with interest, a fundamental difference in the transaction's legal structure.
Do you review Sharia compliance yourselves?
We coordinate with the financing entity's Sharia board, since final Sharia approval remains that board's responsibility.