Islamic finance
Islamic finance uses structures such as asset sales, leases and partnerships that are designed to comply with applicable Sharia principles. Common principles include prohibition of riba, avoidance of excessive uncertainty and prohibited activities, and appropriate connection between returns and real transactions or risk. Murabaha, ijara, mudaraba, musharaka and sukuk have different rights and risks; they should not be treated as interchangeable loan labels. Contracts, legal frameworks and Sharia assessments vary. The current FM guide requires identification and discussion, not calculations of these instruments.
Worked example
A business needing equipment compares a cost-plus asset sale with a lease. The provider and business examine ownership, payment, maintenance and default provisions before deciding whether either structure meets their needs and applicable requirements.
Common mistake
Assuming that every Islamic finance arrangement shares the risk in the same way or that a familiar conventional label describes all its legal rights.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | AFM | Direct | September 2026–June 2027 |
| ACCA | FM | Direct | September 2026–June 2027 |