Sharia contravention

Cover story

The Islamic financing industry has become embroiled in a vicious debate over an innovative type of sharia-compliant structure that has been used as an underlying for structured products issuance. The structure allows investors to access returns from assets that are prohibited under sharia by using a total return swap in the form of an Islamic contract called a Wa'd (promise), so that the final return is delivered in compliance with sharia. Effectively the structure includes an investment in