Andrew M Metcalf and Michael Rainey
King & Spalding
Islamic, or shariah-compliant, finance is practised in various jurisdictions throughout the world. Although each country will have variations, one of the most striking features of Islamic finance as a legal discipline is that it includes core concepts and structures that cross jurisdictional boundaries. Given the importance and ubiquity of these concepts and structures, a short introduction to them is in order.
In practice, Islamic financial institutions and investors typically engage shariah scholars to establish investment guidelines and parameters for investment activity. Efforts have been made to increase uniformity among these shariah advisers, in the hope of creating a more standardised market. For example, the Accounting and Auditing Organization for Islamic Financial Institutions, a non-profit industry-sponsored organisation, issues non-binding shariah standards developed in consultation with industry practitioners. Other influential bodies include the Fiqh Academy of the Organization of the Islamic Conference, the Shari’ah Supervisory Board of the Islamic Development Bank, and the Islamic Financial Services Board in Kuala Lumpur. These bodies and individual shariah scholars provide the context for Islamic finance generally. The degree to which their rules are incorporated into legal regimes varies between jurisdictions.
Islamic finance has grown rapidly over the past 20 years, in market participants, structuring expertise and transaction types. Though still a relatively small industry compared with the overall financial market, Islamic finance is vibrant.