Shariah Compliant Funding

Exploring Shariah-Compliant Invoice Financing for Clients

One of the most fulfilling aspects of my work with Fiskal is supporting clients in finding financial solutions that align with their values. Recently, I’ve been diving into Shariah-compliant funding, specifically invoice finance options for clients seeking finance that adheres to Islamic principles.

Shariah-compliant invoice finance offers an alternative to traditional models that rely on interest-based transactions. Instead, these solutions are structured through Murabaha (cost-plus-profit sales) or Wakalah (agency agreements) arrangements. Here’s how these work:

• Murabaha: In this structure, a financier purchases the goods or invoices directly and then sells them to the business at a predetermined markup. The markup ensures profit for the financier without using interest, making it compliant with Shariah law. This model provides upfront funds for the business and is structured with transparency, as both the cost and the markup are disclosed.
• Wakalah: In a Wakalah arrangement, the financier acts as an agent for the business, collecting payments from outstanding invoices on their behalf. The business pays an agreed-upon fee for this service rather than interest. This setup supports cash flow without conflicting with Islamic principles and aligns well with the ethical standards many clients prioritise.

While the structure can be complex, Shariah-compliant invoice finance opens doors for businesses needing liquidity while staying true to their values. Navigating these frameworks has been challenging but also immensely rewarding, as I uncover ways to help clients achieve ethical finance solutions that are often underrepresented in the market.

The process isn’t always easy, but I love a challenge!

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