Special purpose vehicles in Islamic finance: the Kingdom of Bahrain as a case study

What is it about?

This paper looks at why Islamic banks use special purpose vehicles (SPVs) in their financial transactions, based on interviews with professionals in the industry. The study focuses on Islamic banks in Bahrain and is based on conversations with 35 banking experts. The results show that banks use SPVs for several important reasons, including protecting investors from financial risk, meeting legal and tax requirements, and making sure deals follow Islamic (Shari’a) law. While the study provides insights specific to Bahrain, more research is needed to understand how this works in other countries. This research adds value by sharing real-world views from people working in the field.

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