Equity-Based, Asset-Based and Asset-Backed Transactional Structures in Shari’a-Compliant Financing: Reflections on the Current Financial Crisis*

Abstract

This paper presents interest-free equity-based, asset-based and asset-backed transactional structures endorsed by Shari’a-compliant finance. These structures could explain the potential and relative insulation, yet not immunity, of Islamic financial institutions from the financial crisis. Although Shari’a-compliant financing cannot solve the current financial crisis, the recovering market could consider incorporating some of the insulating principles underlying Shari’a-compliant financing and securitization products, as exemplified in the sample of Shari’a-compliant products in this paper, so as to offer better consumer protection.