Common Islamic finance structures used in project finance
Common Islamic finance structures used in project finance

The following Banking & Finance practice note provides comprehensive and up to date legal information covering:

  • Common Islamic finance structures used in project finance
  • Greenfield projects—Istisna’a-Ijarah
  • Istisna’a
  • Ijarah
  • Forward Ijarah
  • Brownfield projects, short lead times and refinancings—standalone Ijarah
  • Other Islamic structures in project finance
  • Conventional/Islamic tranches
  • Istisna’a-Ijarah documentation
  • Investment Agency Agreement
  • More...

This Practice Note considers the various Islamic or Shari’ah compliant structures typically seen in project financings and looks at the documentation involved in those structures.

It assumes a working understanding of the key principles of Islamic finance. For further details of these principles, see Practice Notes: Key principles of Islamic finance and Sources of Shari'ah.

It also assumes a working understanding of typical conventional project finance frameworks and participants. For further details of these, see Practice Notes: Introduction to project finance, Project finance—key project parties, Project finance—key finance parties, Types of projects and Project finance—meaning of completion and its effect.

The structures outlined below are somewhat more complex, involve more moving parts and entail parties signing up to a greater number of documents than their conventional equivalents. They are, however, established forms of financing with which most financial institutions and law firms in the market are familiar.

Greenfield projects—Istisna’a-Ijarah

Typically, greenfield projects (ie projects on unused lands where there is no need to remodel or demolish existing structures) that entail a lengthy construction or development phase followed by an operating phase (for example, infrastructure, power, transport, plant and machinery) are financed using a two-phased Istisna’a-Ijarah structure: an Istisna’a or ‘procurement’ arrangement applies to the project’s construction or development phase and an Ijarah or ‘lease’ arrangement to its operating phase.


Under the Istisna’a construction or development phase, the financial institutions (the

Popular documents