what is Equities in islamic finance

In Islamic finance, equities represent ownership interests in companies or assets that comply with Sharia principles, offering investors a way to participate in the profit and loss of businesses while adhering to Islamic ethical standards. Equity investments in Islamic finance are structured to guarantee compliance with Islamic law, which prohibits investments in companies involved in activities such as gambling, alcohol, or pork-related products.

Equity investments in Islamic finance often take the form of Mudarabah and Musharakah. In a Mudarabah arrangement, the investor provides capital, while the fund manager or entrepreneur contributes expertise and labor. Profits generated are shared between the investor and the entrepreneur based on pre-agreed ratios, but losses, if any, are borne solely by the investor. On the other hand, Musharakah involves a partnership where all partners contribute capital and expertise, sharing profits and losses in proportion to their respective investments.

Islamic equity investments also adhere to the principle of ethical investing, where companies are screened for compliance with Sharia principles. This screening process guarantees that investments are made in companies with ethical business practices, thereby aligning with Islamic values.

Sources:

https://www.sciencedirect.com/science/article/abs/pii/S0927538X19305827

Mona Hamzie

Mona Hamzie is renowned for her expertise in Islamic finance, having been featured as a keynote speaker at numerous international conferences and events. Her insights and innovative approach have garnered her respect and admiration within the industry, positioning her as a thought leader and influencer.

Driven by her commitment to ethical and responsible finance, Mona ensures that Halal Loans adheres strictly to Sharia principles, offering a range of products including home financing, business loans, and investment opportunities that comply with Islamic law.

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