International Business Research; Vol. 11, No. 2; 2018 ISSN 1913-9004 E-ISSN 1913-9012 Published by Canadian Center of Science and Education 176 A Conceptual Framework for Islamic Institutional and Retail Investment in Maritime Assets Adam Abdullah 1 , Rusni Hassan 1 , Salina Kassim 1 1 IIUM Institute of Islamic Banking and Finance (IIiBF), International Islamic University Malaysia (IIUM), Jalan Gombak, 53100 Kuala Lumpur, Malaysia Correspondence: Adam Abdullah, IIUM Institute of Islamic Banking and Finance, International Islamic University Malaysia, Jalan Gombak, 53100 Kuala Lumpur, Malaysia. Received: December 26, 2017 Accepted: January 11, 2018 Online Published: January 18, 2018 doi:10.5539/ibr.v11n2p176 URL: https://doi.org/10.5539/ibr.v11n2p176 Abstract The purpose of this research is to provide a conceptual framework for Islamic institutional and retail investment in maritime assets. Our objectives are to provide an introduction to seaborne trade and analyze trends in institutional interest in alternative assets and international shipping as well as highlight Islamic and conventional equity structures for institutional and retail investors. Our findings reveal that an Islamic private equity framework involving an unlevered, tax-free investment in maritime assets provides a real alternative to conventional lending and even successful tax-efficient conventional equity structures, since they are not entirely without issues given the significant presence of debt financing from maritime banks. There is a demand for alternative sources of finance, such that Islamic equity finance, rather than conventional lending or structured debt can develop international shipping involving Islamic institutional and retail investment in maritime assets. Keywords: Islamic finance, investment, international shipping 1. Introduction Seaborne trade is fundamental to globalization: 84% of global trade, representing 11,128 million tonnes, is carried by international shipping totaling 1.75 Bn DWT, 87% of which, is carried by the primary shipping segments involving are bulkers (43%), tankers (31%) and containerships (13%): however, 75% of ship-finance is financed on a conventional basis and Malaysian Islamic financial institutions (IFIs) and investors have essentially no exposure to international ship-financing (Abdullah, 2016). In order to determine the willingness and ability to finance maritime assets, investors must understand the associated risks and rewards with regard to international shipping associated with equity structures, as an alternative to risk-free debt finance. In order to facilitate an understanding of international shipping, we begin with an overview of the importance of global seaborne trade and identifying the primary shipping segments involving bulkers, tankers and containerships (section 2). We also analyzed trends in institutional interest in alternative assets and shipping (section 3). We then identify a suitable investment framework for Islamic private equity institutional investors (section 4) and for retail investors involving Islamic finance institutions (section 5). We have also analyzed successful precedents with regard to tax-efficient equity investments in Norway (section 6) and in Germany (section 7). Finally, we provide some concluding remarks and recommendations (section 8). 2. Overview of Seaborne Trade Essentially, growth fundamentals drive shipping investment returns. On average, since 2009 (post financial crisis) approximately 84.5% of global trade is carried by the international shipping industry (table 1), with 2016 maintaining a constant trend at 84%, representing 11,128 million tonnes (table 1, figure 1), although the forecast for growth in 2017 is expected to soften slightly to 2% year-on-year (figure 1).