IslamicFinance.de

The limited availability of capital through conventional sources makes it all the more important that the oil and gas industry, in particular, consider alternative financing products. Shariah-compliant finance has the potential to unlock largely untapped liquidity in the Gulf and elsewhere that could add to and complement existing pools of capital required by the sector. (According to the Times of London, Shariah-compliant government bonds, known as sukuk bonds, comply with Islamic law, which forbids the earning of interest on money lent. Instead, bondholders receive “rent” on leasing government assets such as buildings. At the end of the bond term, the Treasury buys back the asset, releasing payments to the investor. Most Islamic financial products work on the principle of investing in a fixed asset able to generate a rate of return, such as property that yields rent, or an asset that can repay a larger capital sum on redemption.) In fact, only two months ago General Electric became the first Western industrial company to issue a sukuk bond, worth around $500 million. Clearly, there is a strong business case that Shariah-compliant finance — worth more than $1 trillion worldwide — could benefit the oil and gas industry by adding flexibility to the marketplace.