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In the last 5 years, we’ve seen more Islamic banks in the U.S. offering a wide range of financial services and having developed techniques to provide financing while staying sufficiently true to Sharia principles. Their transactions can use both Sharia-compliant and conventional funding. This is done by separating assets and cash flows.

However, there are few fully operational Islamic banks which offer halal financing products such as Ijara, Mudaraba, Murabaha and Musharaka.

If you intend to start financial activities in the United States and use Sharia-compliant instruments, it is worth considering that there are no laws specifically related to Islamic finance. This means that registered US financial companies offering Islamic financial products are governed by the same federal and state laws as regular ones.

Legal framework

There are certain parallels between Islamic law and US law, and they do not come to controversy at a theoretical level. Both legal systems, for instance, share concerns against unjust enrichment, try to protect property rights, and enact laws to fulfill such purposes. 

Although there are no specific laws regulating Islamic finances, it is worth noting that the Ijarah and Murabaha structures are approved in the U.S. rules for retail operations.

Authorization of Islamic banks in the United States

Foreign financial institutions may offer US-approved Islamic banking products. For example, ijara and murabaha for mortgages and retail finance. Some banks have set up Islamic finance departments.

If you intend to register a financial company in America, pay attention to the need to obtain a banking license in the United States. You will also need licensing for retail lending in the states where you will be operating.

Difficulties with insurance

Traditional forms of insurance involve an unacceptable level of uncertainty. It is important to understand that life insurance can not be provided as it does not comply with the sharia law which prohibits "gharar," that is an "unacceptable" level of risk or uncertainty. The point at which risk and uncertainty reach an "unacceptable" level is determined on a case-by-case basis.

As a result of this prohibition, contracts cannot involve the sale of a non-existing object. Therefore, such instruments as futures and options contracts are generally unenforceable in Islamic financial operations.  

Insurance standards make it problematic to work with takaful in the US, as licensing requirements for insurance companies differ in each state.

If you intend to start an insurance business in the United States, please note that commercial and residential property insurance is the only insurance currently offered as takaful.

Sharia securities

The well-known Islamic financial instrument Sukuk is much akin to a conventional bond in the Western model. However, it is worth noting that there are no Sukuk lists on the US security exchanges at the moment but there are signs that the situation may change.

Sukuk explained

Sukuk must be asset-backed and subject to a Sharia-compliant contract. The key principles of a Sharia-compliant contract are: 

  • transparency and clarity of rights and obligations; 
  • income from securities must be related to the purpose for which the funding is used; 
  • securities are to be backed by real underlying assets,
  • assets must be ethical in nature.

Interestingly, the Sukuk are issued by private companies in the States, while the main issuer in other jurisdictions is the government. 


The Islamic finance industry is struggling to develop financial instruments for low-cost funding, which makes them attractive for financial markets of any country. Despite much prejudice about it in the United States, sharia banking is making its way to this huge market.

If you need more information about the Islamic banking regulation in the United States, you are welcome to sign up for an individual consultation by contacting our specialists. To do this, please contact solicitors of  IQ Decision UK in any convenient way or using the feedback form below.