Islamic private equity: what is new?
The current paper analyzes similarities and differences between conventional and Islamic private equity (PE). Despite the financial subprime crisis and the lack of liquidities in financial markets, PE still play an important role in financing growing unlisted firms all over the world. However, conventional PE and Islamic PE display different features. First, Islamic PE funds have less investments opportunities and cannot diversify their projects across activities and sectors mainly because of the Shari’ah compliance criterion. For instance, the PE funds is composed of the managers team, the Shari’ah supervision board SSB and the supervision compliance officer SCO. Second, the choice of PE partnerships depends on the target’s performance, the Islamic scholars’ school and the religiosity degree of the country where they operate, and the SSB policy. Third, they bear varied and different risks from their conventional counterparts. As a consequence, Islamic PE financing is expensive and still not very competitive. Fourth, to overcome and mitigate risks, conventional PE funds can issue convertible securities and abandon prematurely bad quality projects. In contrast, Islamic PE funds are actively involved in the project only in specific cases and cannot exit prematurely the target but can sell gradually their stocks to cover their equity. Finally, financial modes vary according to the degree of involvement of the PE fund in the project and the pre-agreed arrangements between the entrepreneur and the PE fund.
|Date of creation:||28 Dec 2011|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Baele, Lieven & Farooq, Moazzam & Ongena, Steven, 2011.
"Of Religion and Redemption: Evidence from Default on Islamic Loans,"
CEPR Discussion Papers
8504, C.E.P.R. Discussion Papers.
- Baele, Lieven & Farooq, Moazzam & Ongena, Steven, 2014. "Of religion and redemption: Evidence from default on Islamic loans," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 141-159.
- Chong, Beng Soon & Liu, Ming-Hua, 2009. "Islamic banking: Interest-free or interest-based?," Pacific-Basin Finance Journal, Elsevier, vol. 17(1), pages 125-144, January.
- Aggarwal, Rajesh K & Yousef, Tarik, 2000. "Islamic Banks and Investment Financing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(1), pages 93-120, February.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:35952. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.