Islamic Finance
The principles behind every Aminah opportunity
Islamic investing is about more than avoiding interest. It also considers how an investment is structured, what investors are entitled to and how risks and rewards are shared. Here are the basics, in plain language.
Money is lent and earns a fixed interest charge, whatever the outcome. Interest (riba) is not permitted in Islamic finance.
Capital buys or finances a real asset or business. Returns come from its use and results, with risk and reward shared according to the contract.
A simplified illustration for learning.
Core principles
Five ideas you will meet everywhere
Riba no interest
Earning money from money, through a fixed charge on a loan, is prohibited. Returns must come from trade, ownership or shared business results.
In practiceInstead of earning interest on a loan, investors share in the rent and sale proceeds of a property.
Gharar no excessive uncertainty
Contracts must be clear. The asset, price, rights, obligations and risks should be known and documented, so no party is misled.
In practiceEach Aminah agreement defines the asset, investor rights, profit-sharing, fees, term and exit conditions.
Maysir no gambling
Gains should not depend on chance or pure speculation. Investments are tied to real economic activity and careful assessment.
In practiceProperty decisions are supported by valuations, financial assessments and a long-term strategy.
Mudarabah profit-sharing
One party provides the capital, the other manages the business. Profits are shared at an agreed ratio; financial losses are generally borne by the capital provider, unless the manager is negligent.
In practiceAn investor funds a trading business run by an experienced entrepreneur, and both share the profits.
Sukuk investment certificates
Certificates linked to underlying assets or economic activities. Holders receive rights to specified assets, benefits or cash flows, rather than interest on a loan.
In practiceA fund issues Sukuk backed by the equipment and income of several SMEs. Aminah’s Sukuk fund is in development.
Risk and reward
Profits and losses are allocated according to the agreed Islamic contract, reflecting the actual ownership, responsibilities and risks of each party.
In practiceHalal does not mean risk-free: your capital can still go down as well as up.
Financing structures
Three structures for entrepreneurs and homebuyers
Each structure has its own rules on ownership, payments and risk. Choose one to see how it works, with a practical example.
MurabahaCost-plus financing
A financing provider purchases an asset and resells it to the customer at an agreed price, which includes a disclosed profit margin. The customer can pay the price in instalments.
The price is fixed and known in advance. The provider earns from the sale of a real asset, not from lending money.
A business buys new production equipment
- The business chooses a machine costing €100,000.
- The financier buys the machine from the supplier and owns it.
- The financier sells it to the business for €112,000: cost plus a disclosed margin.
- The business pays €112,000 in agreed monthly instalments.
Figures are illustrative only.
MusharakahPartnership financing
Two or more parties contribute capital to a business or an asset. Profits are shared according to an agreed ratio, while financial losses are generally allocated according to each party’s capital contribution.
In a diminishing Musharakah, one partner gradually buys the other’s share, which makes it a possible model for home financing.
Buying a home together
- A household and a financier buy a €400,000 home together: 20% and 80%.
- The household lives in the home and pays rent for the financier’s share.
- Each month the household also buys a small part of the financier’s share.
- Rent falls as the household’s share grows, until it owns the home outright.
Figures are illustrative only. Aminah does not currently offer home financing.
IjarahLeasing
A financing provider acquires an asset and leases it to the customer in exchange for rental payments. The provider remains the owner and carries the risks of ownership.
Some arrangements include the possibility for the customer to acquire ownership at the end of the lease (Ijarah wa iqtina).
A clinic leases medical equipment
- The clinic selects the equipment it needs.
- The financier buys the equipment and keeps ownership.
- The clinic pays an agreed rent for using it over five years.
- At the end, ownership may transfer to the clinic, as agreed in the contract.
Figures are illustrative only.
Governance
Sharia governance and investor transparency
Sharia compliance requires more than selecting suitable assets. The agreements, financing arrangements, management and distributions must also be consistent with Islamic principles.
Independent Sharia review
Qualified Sharia specialists review the investment structures, contracts and financial mechanisms. Formal approval or certification is only communicated once confirmed for the specific structure or offer.
Clear contractual terms
Each agreement must define the underlying asset, investor rights, profit-sharing, fees, investment period and exit conditions.
Ongoing compliance
Ongoing Sharia monitoring, the handling of any identified non-compliance and the purification of non-compliant income, in line with the applicable Sharia guidance.
Investor funds
Each offer explains how funds are received, held and managed before acquisition, including safeguards and the treatment of any interest or other non-compliant income.
Transparent fees
Investors receive information about applicable costs and how Aminah and its service providers are remunerated.
Accountability
The documentation identifies who manages the investment, who oversees compliance and who reports to investors.
Learn more
Go deeper with recognised Islamic finance education
For those who want to study Islamic finance in depth, Ethica Institute of Islamic Finance offers self-paced, online certification programs for professionals, founders, investors and students.
Aminah Capital acts as a referral partner of Ethica Institute for education. This does not mean that any Aminah investment has been certified.
- Online
- Self-paced
- Recognised
Certifications
Explore the certification programs
Choose the track aligned with your level of experience and professional focus. Each certification is delivered by Ethica Institute and completed fully online. Enrolment, pricing and course content are handled by Ethica Institute.