Sharia-compliant alternative financing
The world of Islamic finance is expanding rapidly, capturing the attention of investors eager to explore new opportunities for growth in Islamic markets.
We have flexible funding available for transactions that can be structured in a Sharia-compliant way, and we are actively looking for partners to originate compliant dealflow, and we have funding available.
If you are a broker, investor or lawyer that is actively involved in these sorts of transactions in the United States, we would love to hear from you.
Please contact jamie@f2yes.com for more information.
Shariah-compliant bridging finance
F2 Finance is actively developing capabilities to offer Shariah-compliant bridging finance, a form of financing that aligns with Islamic law, or 'Shariah'. This specialized financial solution is designed to quickly and ethically bridge financial gaps, particularly useful in real estate transactions.
Shariah bridging loans provide a temporary financial bridge between the sale of one property and the purchase of another. They help manage financial needs during the interim period before more permanent financing solutions, like residential or buy-to-let mortgages, are arranged.
What sets Shariah-compliant bridging finance apart from traditional bridging loans is its structure. Instead of involving interest, which is prohibited under Shariah, these loans are structured around payment plans that comply with Islamic financial principles. A commonly used method in these arrangements is the Murabaha model. In this model, the financing entity purchases an asset outright and sells it to the borrower at a cost that includes a predefined profit margin, thus avoiding the use of interest.
By focusing on Shariah-compliant bridging finance, F2 Finance is working to meet the needs of clients seeking ethical financial solutions that comply with their religious beliefs. This initiative reflects our commitment to inclusivity and ethical financing practices in the financial services market.
Shariah-Compliant Bridging Finance at F2 Finance
At F2 Finance, we ensure that our bridging finance solutions adhere to Shariah principles, which involve the absence of interest, the productive use of funds, and the asset-backed nature of the loan. Additionally, the properties financed through these loans must not be associated with activities prohibited under Islamic law, such as gambling or alcohol production, and must adhere strictly to ethical business practices.
Risk Sharing
In our Shariah-compliant finance model, risk is shared between the borrower and the lender. This means that if the investment does not perform as expected, both parties share the financial impact, aligning with the ethical principles that underpin Islamic finance.
Exploring the Murabaha Structure
Murabaha, a cornerstone of Islamic finance, operates on a cost-plus financing basis. It is essentially a sales contract where the cost and profit margin are transparently agreed upon by both parties involved. This model allows customers to purchase goods via an intermediary—who acquires and then resells the goods at a marked-up price. The markup is known upfront, ensuring transparency and eliminating hidden costs.
How Murabaha Works
A client identifies a need to purchase an item but lacks the immediate funds.
F2 Finance purchases the item directly from the supplier.
We then sell the item to the client at a price that includes a predefined profit margin.
The client makes payments over time, similar to installments, but these payments are fixed to avoid any penalties or additional charges, as such practices contradict the Islamic prohibition against Riba (usury).
Murabaha vs. Interest-Based Financing
While there may be superficial similarities between conventional interest-based loans and Murabaha transactions, it's important to note that under Islamic law, any extra charge on late repayments is strictly forbidden. Therefore, Murabaha stands out as a uniquely ethical form of financing.
Murabaha's Role in Shariah Bridging Finance
Within the realm of Shariah bridging finance, Murabaha plays an essential role by providing individuals and businesses with access to short-term funds that comply with Islamic principles. This financing option is particularly valuable for transactions such as property purchases or other significant investments requiring immediate capital.
By embracing the Murabaha structure, F2 Finance offers a reliable and principled financial solution, enabling clients to manage their investments without compromising their ethical or religious standards.
If you are interested in working with us on these financing solutions, please get in contact with jamie@f2yes.com.