Mercedes-Benz is hoping to increase its presence in the lucrative Middle-Eastern market by establishing a pair of financial firms that are fully compliant with the specific regulations of Islamic law, or Sharia.
Islamic law prohibits its followers from charging or collecting interest fees when money is lent or accepted, or investing in businesses, goods or services that are contrary to its religious principles.
To get around this, Mercedes-Benz has launched Mercedes-Benz Finance Middle East and Mercedes-Benz Leasing Middle East. The new companies are headquartered in Dubai and offer loans and leasing to private and business customers for new and pre-owned passenger cars and commercial vehicles, including the all-important Sharia-compliant Islamic finance product.
There are several methods of investing that comply with Islamic law. For example, instead of offering a loan with interest to buy a car, the financial firm could purchase the car outright at an inflated price that includes the interest portion and then sell it to a customer who can then make fixed payments on a regular basis.
Mercedes-Benz picked Dubai for its new offices as the United Arab Emirates, which Dubai is the most popular state in, represents the most important passenger car market in the Middle East for Mercedes-Benz. In 2008, Mercedes-Benz sold 7,800 passenger cars and 3,100 commercial vehicles in Abu Dhabi, Dubai, Sharjah and the Northern Emirates.