Aviation finance—Islamic finance considerations
Produced in partnership with Norton Rose Fulbright

The following Banking & Finance practice note produced in partnership with Norton Rose Fulbright provides comprehensive and up to date legal information covering:

  • Aviation finance—Islamic finance considerations
  • Principles of Islamic finance
  • No unjust enrichment—Riba
  • No uncertainty—Gharar
  • No speculation—Maisir
  • Sharing of risk
  • Islamic finance structures
  • Features of an Islamic lease (Ijara)
  • Other structures

Aviation finance—Islamic finance considerations

The Islamic finance industry has seen rapid growth in recent years as financial institutions and their clients look towards exploring alternative methods of financing.

Islamic finance is an asset-based system and there has been an increase in the use of Islamic finance in the complete and partial financing of aircraft, assets which are permissible investments under the Islamic law (Shariah).

Principles of Islamic finance

The principles of Islamic finance are derived from the Shariah prescribed in the Quran, the sacred book of Islam believed to record the Word of God as revealed to the Prophet Mohammed and the Sunnah, the practices of the Prophet Mohammed.

Islamic finance is established in order to ensure that wealth remains pure and is utilised in a just manner in accordance with the following general principles:

No unjust enrichment—Riba

  1. the charging of interest, or Riba, is strictly prohibited

  2. in Islamic finance, money should not be treated as a commodity and does not have any intrinsic value; it is only viewed as a means of exchange. Any return on money employed should be linked to the profits of an enterprise

  3. the concept of Riba extends beyond that of ‘interest’ to include the idea of unfair gain or exploitation (ie where unequal countervalues are exchanged in a sale transaction). The prohibition also covers exploitation by one party who owns a product that includes

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