Designing Sharia-compliant structured products is no longer a niche exercise confined to a handful of Islamic banks. Global investors, from GCC family offices to Southeast Asian institutions and Sharia-focused funds in Europe, are actively looking for halal investment notes that offer sophistication, transparency and genuine Islamic investor solutions, without sacrificing regulatory rigor or operational efficiency.
This article looks at how to think about Sharia-compliant structured products using a securitization mindset, how they can sit inside a robust platform, and where they connect with the broader work MTCM does on securitization, dual-format issuance and ESG.
1. What Makes a Structured Product “Sharia-Compliant”?
A Sharia-compliant structured product must respect a few non-negotiable principles:
- No interest (riba).
- No excessive uncertainty (gharar) or speculation (maysir).
- No exposure to prohibited (haram) sectors or activities.
- A link to real assets, real economic activity, or accepted contracts.
In practice, halal investment notes are usually built using contracts such as:
- Murabaha (cost-plus sale).
- Ijara (leasing).
- Musharaka / Mudaraba (partnership / profit-sharing).
- Wakala (agency-based investment).
The role of structuring is to combine these elements into products that deliver familiar capital-market outcomes, income, risk transfer, capital protection, without stepping outside Sharia boundaries. If you want a broader context on how Islamic structures interact with securitization, MTCM’s page on securitization in Islamic finance is a useful reference.
2. Using Securitization Vehicles for Sharia-Compliant Structured Products
Instead of inventing entirely new machinery, many Islamic investor solutions now sit inside standard securitization or note-issuing platforms, adapted to Sharia-compliant assets and documentation.
A typical setup might look like this:
- A Sharia-compliant asset pool (for example, Murabaha receivables, Ijara rental flows, or participations in Musharaka projects) is identified.
- These assets are transferred or linked to a dedicated compartment in a securitization vehicle.
- The compartment issues Sharia-compliant notes, where the contractual terms reflect accepted Islamic contracts rather than conventional loan language.
Compartment-based platforms are particularly helpful here: one vehicle can host both conventional and Islamic strategies in separate, fully ring-fenced compartments, as described in our article on compartment-based securitization.
For global investors, the advantage is clear: they get the comfort of a familiar securitization or note programme framework, combined with the assurance of Sharia oversight on the Islamic compartments.
3. Building Halal Investment Notes: Key Design Choices
When structuring halal investment notes, three design decisions are especially important.
3.1. Contract and Payoff Logic
The first question is: which contract sits at the heart of the product?
- For income-focused notes, Ijara-based (lease-backed) or Murabaha-based flows can be used to provide periodic distributions.
- For more equity-like solutions, Musharaka or Mudaraba structures can share profits from real business activity.
The payoff profile, capital preservation, target return ranges, upside participation, has to be mapped onto these contracts. The aim is to give Islamic investors an experience comparable to conventional structured notes but grounded in halal economics.
3.2. Asset Screening and Ongoing Sharia Compliance
Sharia boards and internal teams need to define:
- Eligible assets and sectors.
- Financial ratio screens (for example, limits leverage or non-compliant income in underlying issuers).
- Purification rules where minor non-compliant elements arise.
Because MTCM approaches Islamic finance through the lens of securitization, these rules are embedded at pool and compartment level, rather than bolted on later. This is consistent with the approach explained on the Islamic finance securitization page.
3.3. Documentation and Investor Communication
Clarity matters. Documentation must:
- Use contract names and structures recognized in Islamic finance.
- Explain to investors, conventional and Islamic, how cash flows are generated, allocated and monitored.
- Show where Sharia boards or advisors are involved and how often structures are reviewed.
This aligns with the way MTCM generally treats investor communication across its securitization solutions: transparent, repeatable, and easy to due diligence.
4. Platform Thinking: Islamic Compartments Alongside Conventional Ones
One common question from global investors is: “Can a single platform really handle both Sharia-compliant and conventional products?”
In practice, the answer is yes, as long as:
- Each Islamic strategy has its own compartment, with clear legal separation.
- The assets, contracts and documentation in those compartments are structured and reviewed according to Sharia rules.
- Conventional compartments are kept distinct, with no commingling of ineligible assets.
This multi-compartment approach allows:
- A GCC family office to buy a Sharia-compliant structured product backed by halal assets.
- A European insurer invests in conventional real estate or infrastructure compartment.
- Both benefit from the same overarching governance, risk management and operational systems.
For an overview of how dual-format and digital issuance can also live in this world, you can look at the MTCM dual-format issuance framework, which can be applied selectively to Islamic and conventional compartments alike.
5. Digital Rails and Sharia-Compliant Structured Products
Digitalization is not inherently haram or halal; it is a delivery and record-keeping tool. That means Sharia-compliant structured products can also make use of:
- Permissioned digital securities representing halal investment notes.
- Dual-format issuance, where an Islamic note exists as both a traditional security and a blockchain-based instrument.
- On-chain compliance layers that help enforce whitelisting and investor eligibility.
For institutions already exploring the securitization of digital assets, adding Sharia-compliant compartments is less a technical leap and more a question of designing the underlying contracts and assets correctly.
The upside is significant: Islamic investors gain access to more efficient, transparent rails; issuers tap a global base of Sharia-focused capital without compromising on regulatory quality.
6. When Does It Make Sense to Use Sharia-Compliant Structured Products?
Sharia-compliant structured products make the most sense when:
- You have a halal asset base (or can originate one) that lends itself to securitization or note issuance.
- Your investor base includes Islamic banks, Sharia funds, or family offices that want more than simple deposits or sukuk.
- You are willing to build and maintain a credible Sharia governance layer, not just applying a label.
- You already think in terms of platforms and compartments, where Islamic and conventional deals coexist but do not mix.
In those circumstances, using MTCM’s securitization-driven approach to design Islamic investor solutions can unlock new funding and investment channels, particularly across Europe, the GCC, and Asia.
Next Step: Explore Islamic Investor Solutions with MTCM
Designing Sharia-compliant structured products is as much about architecture as it is about contracts. The right framework lets you:
- Offer halal investment notes that stand up to due diligence from both Sharia boards and conventional risk teams.
- Run Islamic compartments side by side with other real-world asset strategies on a single platform.
- Decide, deal by deal, where dual-format or digital issuance adds value for your global investor base.
If you are considering Islamic investor solutions, whether for a dedicated Islamic platform or as part of a hybrid architecture, MTCM can help you design and implement the right structures.
Reach out to MTCM to discuss your Sharia-compliant structured product ideas and how they could fit into a scalable securitization platform.
