Contemporary Islamic Finance: Innovations, Applications and Best Practices

CHAPTER 17

Stepping Forward, Backward, or Just Standing Still?

A Case Study in Shifting Islamic Financial Structures Offshore

UMAR F. MOGHUL

Partner, Stephenson Harwood LLP

Public discourse surrounding the fundamental challenges facing the fast-growing Islamic finance industry are a welcome development and a sign of the industry's growing confidence and security. Among these challenges are the “adaptive strategies” being utilized to help enable establishment of the contemporary Islamic finance industry.¹ These strategies are understood, particularly within inner circles, to constitute a temporary means until such time as more authentic means become available and viable.

This chapter introduces an offshore leasing structure utilized as a key component of an Islamic acquisition structure in United States. Its development is important for a number of reasons. First, previous acquisition structures of global consequence, employing murabahah or ijarah as their basis, were developed as the result of significant efforts. In many respects, the subject structure may allow these accomplishments to be set aside, as will be explained below, but at a potentially significant cost with regard to the values and principles underlying Islamic finance. Second, this structure stands as evidence of the ability of Islamic law and the industry to respond to changing markets as well as social and political conditions. Third, the structure is a useful lens through which to discuss certain of the various ...