A contract to innovate

Due to the basic principles regarding riba as forbidden and trade as lawful, Islamic finance contracts need to be structured as a trade between the finance provider and the customer. Thus the lawyer has to draft the contract as if it were a straight trade between the bank and the customer, while still bearing in mind that it is primarily a financing contract. Contracts subject to the jurisdiction of a non-Muslim country, or even international Islamic financial contracts, present additional complications. These complications may hamper the progress of Islamic finance. UK jurisdiction treats Islamic finance unfavorably. When drafting the contract, the lawyer needs to also keep in mind the needs of both the bank and the customer, as well as the likely treatment of the contract by the shari`a advisors.