Islamic finance structures — murabaha (cost-plus sale financing), ijara (leasing), and sukuk (Sharia-compliant bonds) — each follow specific Sharia principles around risk-sharing and the prohibition of interest, and getting the underlying structure right matters both commercially and for Sharia compliance.
These structures are also regulated by SAMA like their conventional equivalents, meaning a Sharia-compliant facility needs to satisfy both the Sharia board's requirements and SAMA's regulatory framework simultaneously. The conventional-side documentation and security framework is covered under banking & finance law.
Takaful operates on a cooperative, risk-sharing model distinct from conventional insurance, and takaful providers in Saudi Arabia are regulated under the same Cooperative Insurance Companies Control Law framework as conventional insurers, with additional Sharia-compliance requirements layered on top.
This practice supports both takaful providers managing their regulatory and Sharia compliance, and policyholders with a dispute over a takaful policy. Conventional insurance disputes and SAMA insurance compliance sit with our insurance law practice.
A Sharia board's approval focuses on whether a structure genuinely complies with Islamic finance principles — the underlying asset transaction, the risk-sharing mechanics, the avoidance of prohibited elements — while SAMA's review focuses on separate regulatory concerns like consumer disclosure, capital treatment, and standard prudential requirements that apply regardless of whether a product is Islamic or conventional.
We structure Islamic finance products with both tracks in view from the start, since a facility that a Sharia board approves without issue can still stall or draw regulatory scrutiny over documentation and disclosure gaps that have nothing to do with its Sharia compliance itself — treating the two approval processes as a single combined step avoids a rework cycle late in the process. Sukuk issuance into the capital markets runs jointly with our capital markets & securities team.
A murabaha facility is only genuinely Sharia-compliant if the underlying asset purchase and resale actually occur as real, sequenced transactions — the bank genuinely acquiring the asset before selling it on to the customer at a markup — rather than functioning as a documentation formality wrapped around what is, in economic substance, simply an interest-bearing loan.
We review the actual sequencing and asset-transfer mechanics of proposed murabaha structures closely, since a structure that looks correct on paper but doesn't reflect genuine underlying transactions creates real Sharia-compliance risk regardless of how the documentation is worded.
Sukuk represent an ownership interest in an underlying asset or venture rather than a pure debt obligation, structured to avoid interest in line with Sharia principles, while a conventional bond is a straightforward interest-bearing debt instrument.
Takaful operates under the same core regulatory framework as conventional insurance in Saudi Arabia, with additional Sharia-compliance requirements specific to its cooperative, risk-sharing structure.
Yes, subject to the same SAMA licensing framework that applies to any bank or finance company operating in the Kingdom, alongside the Sharia-compliance requirements specific to Islamic finance products.
Not automatically — Sharia approval and SAMA regulatory approval are separate tracks addressing different concerns, so a structure can pass one review and still need work on the other.
The underlying asset purchase and resale need to be real, sequenced transactions — the financier genuinely acquiring the asset before reselling it — not a documentation formality wrapped around what is economically just an interest-bearing loan.
Ideally alongside — reviewing both the Sharia and regulatory angles together from the start avoids discovering a documentation or disclosure gap late, after the Sharia board has already signed off.
Expert Riyadh