CAPITAL GUARANTEE IN ISLAMIC EQUITY FINANCE ?

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1. In an equity financing deal (Mudharabah / Musharakah), which is only with sharing in profit & loss by risk sharing principles, the capital / profit / income can not be guaranteed therein. Thus, a bank / fund manager / fund custodian in the above type of deal, is not allowed to provide any capital / profit / income guarantee to the customer / fund owner concerned.

2. But, if the bank / fund manager / fund custodian wishes to take a takaful coverage to protect the managed capital (owned by the customers) against the deficit risk in the undertaken capital itself (but not on profit / income per se), is allowed.

3. If the Central Bank of a country concerned / IDB / Re-takaful, is arranged to provide partial or full guarantee (by way of donation / Qardh Hasan /re-takaful against the deficit risk in one's undertaken capital itself (but not on profit / income), is also allowed.

4. the abovementioned-Guarantee is a cooperation for the noble cause of providing greater benefit not only for the industries, but also for the customers, which eventually contributes to the development of Islamic financial system for the benefit of the Ummah in general.

Thus, it is justified by the Qur'anic principle".... cooperate each other in righteousness & piety, but do not cooperate each other in sin & rancor..." (5:2).