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Leading football clubs across Europe are increasingly carrying out financial transactions that comply with Sharia law. Alex Miller discovers the principles of Sharia law financial transactions and some of the deals carried out this way

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An increasing number of football clubs across Europe have been purchased by wealthy Middle Eastern individuals or organisations – but it has largely gone unnoticed that a rising number of football clubs across Europe are also carrying out financial transactions that comply with Sharia law.

Manchester City is owned by United Arab Emirates-based Sheikh Mansour, whose al-Nahyan's family are rulers of Abu Dhabi. Mansour bought the club from disgraced former Thai prime minister Thaksin Shinawatra.

Other high-profile clubs include Paris Saint-Germain, bought in 2011 by the Qatar Investment Authority, an investment arm of the Qatari government.

In 2011 Nottingham Forest, the former European championship winning club, was purchased by Kuwait’s Al-Hasawi family, while in December 2012 Dubai-based Gulf Finance House Holdings (GFH) paid approximately £50m for Leeds United.Portsmouth, Malaga, and Servette in Switzerland, have also been acquired by Middle Eastern owners in recent times.

But the drivers of the rise in financial transactions are not necessarily the clubs themselves – or their owners – but more so by the small number of Middle Eastern banks that are increasingly involved in the funding of major deals, but who will only do so under Sharia law. Financial transactions such as transfer payments and sponsorship deals have been funded this way.

Islamic investment is increasingly financing European football too. Arsenal’s Emirates Stadium in London was built with Middle Eastern money, while five of the biggest clubs in Europe are sponsored by a Gulf company. They include Barcelona, Arsenal, AC Milan and Manchester City.

Islamic finance is based on the teachings of the Koran. These teachings provide the basis of Islamic – or Sharia – law. One of the fundamental principles of Sharia finance is that money has no intrinsic value but is purely a medium of exchange.  

Money should not be made from money itself, but through legitimate trade in goods and services. The Institute of Islamic Banking and Insurance states that 'as a matter of faith, a Muslim cannot lend money to, or receive money from, someone and expect to benefit – interest (known as riba) is not allowed. Riba also applies when borrowing money, as the lender profits from the applied interest. To comply with Sharia, any loan must be Qard (free of profit)'.


islamic Financial model

The Islamic financial model works on the basis of risk sharing.

The customer (in this case a football club) and the bank share the risk of any investment on agreed terms and divide any profits between them.

The main categories within Islamic finance are Ijara, Ijara-wa-iqtina, Mudaraba, Murabaha and Musharaka.

Ijara is a leasing agreement whereby the bank buys an item for a customer and then leases it back over a specific period.

Ijara-wa-Iqtina is a similar arrangement, except that the customer is able to buy the item at the end of the contract.

Mudaraba offers specialist investment by a financial expert in which the bank and the customer shares any profits.

Customers risks losing their money if the investment is unsuccessful, although the bank will not charge a handling fee unless it turns a profit.

Murabaha is a form of credit, which enables customers to make a purchase without having to take out an interest bearing loan. The bank buys an item and then sells it on to the customer on a deferred basis.

Musharaka is an investment partnership in which profit sharing terms are agreed in advance and losses are pegged to the amount invested.

New Century Finance (NCF) completed the very first financing transaction for a Premier League club and the first of its kind in European football, which was Sharia-law compliant. It came about when travel company Thomas Cook agreed to sponsor the Manchester City kit in 2003, then under the ownership of Shinawatra. The deal was financed by the Bank of London and the Middle East (BLME).

NCF founder Richard Price believes this deal has formed a template for future robustly structured transactions in the UK and Europe. He tells Student Accountant: ‘To comply with Sharia law depends on the particular bank you are dealing with; there are differences among them.

‘In the case of Manchester City, an Imam sat on a credit committee and had to decide whether the structure of the deal fitted inside the rules of the Koran.'

Bizarrely, the deal was structured as a metals trading agreement and this had to be explained to officials at the club. Subsequently, Thomas Cook offered a promissory note to Manchester City and which was endorsed to the funder.

Despite the rise in transactions carried out this way, there are only a limited number of funders of these types of deals.

As was the case with Manchester City and Thomas Cook, promissory notes are issued ahead of football club-based financial deals as these kinds of transactions lend themselves to Sharia law because they don’t mention interest.

‘As a result, major financial transactions such as transfer expenditure, transfer fees, broadcast rights, and season ticket revenues can be done under Sharia law,’ adds Price.

The takeover of Leeds was allegedly delayed because the terms of the deal weren’t initially compliant with Sharia law. This delayed obtaining the fatwa that was necessary for the Islamic finance house to complete the long drawn-out takeover.

Meanwhile, at the club’s Elland Road stadium – as with most football clubs in the UK – there are outlets selling alcohol, food points that sell bacon rolls and also betting points that facilitate gambling, areas that don’t comply with Sharia law.

However under Muslim ownership, none of these facilities have to be withdrawn; instead, these parts of the business can be placed into separate ownership. While this is not a straightforward matter given that facilities of this kind are an integral part of the stadium, it has been proven as workable – and clearly has not proved to be a hurdle to Middle Eastern ownership of football clubs across the European continent.


Deloitte: European football clubs with Middle East based ownership were the highest net spenders on player transfers in 2013

Player transfer spending by Premier League clubs in 2013 transfer window was a record, according to analysis by Deloitte.

Gross spending totalled £630m, 29% up on the equivalent 2012 figure of £490m and £130m more than the previous record of £500m set in 2008.

Alex Thorpe, consultant in the Deloitte Sports Business Group, adds: ‘As we have seen in previous transfer windows, some of the highest net spenders have been clubs with Middle East-based ownership. Both the financial backing of the ownership, as well as the impressive revenue growth achieved in recent years, have allowed clubs such as Manchester City and Paris Saint-Germain to again compete at the very top of the market to attract leading talent.’

Last updated: 5 Jan 2014