Shariah Compliant Private Equity and Islamic Venture Capital

Shariah Compliant Private Equity and Islamic Venture Capital

Shariah Compliant Private Equity and Islamic Venture Capital

Shariah Compliant Private Equity and Islamic Venture Capital

Synopsis

This guide shows you how Shariah theory is applied to the private equity industry and how this works in practice. It gives an overview of the industry before focusing on key areas within it, such as profit sharing, valuation, risk mitigation, exit strategies, trust, monitoring methods and due diligence. Case studies and examples of business financial appraisals in the MENA and ASEAN regions, the UK, Europe and the USA give an in-depth view of areas including: the Islamic banking industry; its use as a source of funding in the biotechnology, pharmaceutical, ICT, agriculture and fishery industries; and how it is used by investment companies as part of their asset management strategies. Each case study is accompanied by questions for classroom discussion or assignments.

Excerpt

During the time of Prophet Muhammad (saw), mudhārabah was a form of sale contract used by the trade merchants to finance trade over long distances. Islamic finance then evolved into a wider context during the reign of Umar Al-Khattab’s caliphate when pension and welfare benefits were introduced. Trade was always encouraged among Muslims during the prime of the Islamic civilisation as it creates wealth, opportunities and increased charity for mankind in the name of the Almighty Allah (swt). In addition the specific portion of income generated is given to the poor and this is called zakat. This shows that the existence of a small-business entity is not only for profit but also to assist the poor in terms of charity and opportunity.

The point highlighted here is that these trade and business transactions carried out by the Prophet and his companions were abiding by Islamic law and the business contract was formed on a partnership basis, the mudhārabah. As more modern and sophisticated elements of economic principles evolve, trade and commerce that adhere to Islamic law, that is, Islamic banking and finance, slowly develop and compete . . .

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