Abstract

Structuring traditional investments through a special purpose vehicle

Dr. Ayman Mustafa Hussein al-Dabbagh

The study attempts to answer several questions, most notably: Is the independent financial liability of (SPV) established? What are the most important detailed provisions for its use in conventional investments? What impact does this have on the future and credibility of the Islamic financial industry? What are the most important Shariah controls for such investments? The research followed a descriptive and analytical approach, in which the researcher followed up on what is related to the topic in its sources from contemporary books and research and in the books of early jurists and scholars, with analysis and an attempt to answer the research questions. The research was divided into three main sections: addressed the definition of (SPV), its objectives, financial liability, relationship with the parent institution, and its legal status. the definition of traditional investments within SPVs, their forms, general rules, and some related issues. The third section examined the impact of Islamic financial institutions' involvement in such investments on their future and credibility. The most important proposed standards to regulate the use of (SPVs) in Islamic finance in investment. The research concluded that: Establishing an independent financial liability for the (SPV) does not necessitate the permissibility of transactions between the two parties in all their forms. Rather, each transaction should be subjected to special consideration based on its nature. Financing (SPV) through Murabaha to invest in instruments that are not compliant with Sharia guidelines constitutes an act of illegitimate fraud. Revenue generated from Murabaha investments through a (SPV) in an activity that is not compliant with Sharia guidelines must be disposed of. The ruling on structured investments differs if the purpose is to invest in traditional instruments, such as bonds, than if the purpose is to invest in companies with permissible activities that do not meet Sharia guidelines for investment. This does not necessitate the permissibility of a lesser prohibited activity. The implications of Islamic financial institutions accepting the structuring of conventional investments through (SPV) include the spread of Islamic finance, mitigating the problem of excess liquidity, and undermining the credibility of these institutions. Among the proposed criteria for regulating the use of (SPVs) in Islamic finance for investment are that the investment activity be permissible, that transactions between the parent institution and the (SPV) be in the form of Islamic financing, in accordance with its Shari'a standards and controls, and the necessity of having an independent Shari'a board for the (SPV).

Title

ندوة العمل المصرفي الإسلامي السابعة عشرة

Publisher

الهيئة الشرعية، البنك الأاهلي السعودي

Publisher Country

Saudi Arabia

Publication Type

Prtinted only

Volume

17

Year

2025

Pages

39