A Short Primer On Shariah-Compliant Private Equity Funds

Shariah-compliant private equity funds are governed by the laws and principles of Islam. The amount of capital managed by these funds continues to increase, partly due to the build-up of savings from successive oil and gas booms in the Middle East, the heartland of the Islamic world. Many investors would like to put their money to work in a manner consistent with their religious beliefs. The socially responsible aspects of Shariah-compliant funds may also appeal to secular investors.

Interest

Perhaps the most distinctive characteristic of Islamic finance is the prohibition of interest (Riba). Islamic law conceives of money as a medium of exchange and store of value, but not a tradeable commodity. Accordingly, earning money from money is unlawful (Haaram). Instead, the money should be invested in projects and commerce, with the profits so generated providing the returns to participants.