Risk-Sharing Finance

The contemporary finance deals mainly with multilateral and multi-counterparty transactions. Islamic jurisprudence (Fiqh) has yet to develop its conceptualization of this modality of financing. Thus far, it has become a norm for large financing projects to rely on a complex structure of interconnected bilateral contracts that, in totality, becomes opaque, complex, and costly. An unfortunate result of the unavailability of an efficient Fiqhi model applicable to modern multilateral and multi-counterparty contracts has been that the present Islamic finance has been forced to replicate conventional risk-transfer (interest rate-based) debt contracts, thus drawing severe criticisms of duplicating conventional finance. In 2012, a gathering of some of the Muslim world's most prominent experts in jurisprudence (Fuqaha) and economists issued the Kuala Lumpur Declaration (Fatwa).