Comparison of Islamic and conventional financing of aircrafts

Abstract

The ever-growing religion of Islam is gearing towards shaping up the financial services industry. The emergence of airlines based in the Gulf and Asiatic regions have fuelled the acceleration of Islamic financing of aircrafts. The harmonisation of risk and religion is crucial to the composition of Islamic financing structures. Notwithstanding the importance and emergence of Islamic financing, conventional financing has not been toppled up yet. Conventional financing plays an important role in the aviation industry being the first choice in this industry. These two colossal ideologies serve the same end purpose. That is the financing of projects such as aircraft financing. However, there are a number of fundamental differences between these two ideologies. This paper seeks to analyse and find the differences between Islamic and conventional financing of aircrafts. This paper seeks to do so by the collection of primary data through personnel involved in the financing process of aircrafts. Secondary data was collected by consulting journals, reports, articles, books and websites. Secondary data was essential in better aiding the quest of answering the research question. Ultimately, this paper led to the conclusion that the difference in these two ideologies lies in the structural motives that these are made of. Whilst the financial instruments are different at first glance, their difference lies in the motivation behind them. The salient features of Islamic finance are ultimately what differentiate these two financing ideologies. Further suggestions for research were also put forward in order to better support this paper in the future.