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Dear Lisa,
I am certain of the names of the Islamic instruments and what they are, but classifying some into debt and equity is where I oftentimes go wrong.
Please help me categorise the following into equity and debt modes concerning Islamic Finance.1. Mudaraba – Equity
2. Musharaka – Venture Capital
3. Ijara – Lease
4 Sukuk – Bonds
5. Murabaha – Credit saleI am sure of the following classification, but not the rest:
EQUITY MODES are:
MudarabaDEBT MODES are:
SukukIjara is classified as a lease, which is typically considered a form of debt financing.
Musharakah is a partnership agreement that’s similar to equity financing, but based on sharing profits and losses instead of interest. This formulation is used for an ongoing equity investment.
The murabaha form of financing is typically used in place of loans in diverse sectors. Consumers use murabaha when purchasing household appliances, cars, or real estate.
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