Acquisition Financing from an Islamic Perspective - Case of the Islamic Banks in Egypt

The growing interest in Shari’ah compliant investments, led to an increase of the number of Shari’ah compliant investment companies, and private equity firms that invest in vehicles that comply with Shari’ah rules and standards. Acquisitions is one of the most common types of investment transactions that take place in such investment vehicles, and the founding concept in making successful acquisition is deploying a smaller portion of equity (usually between 20-30%) and finding an external source of financing to provide the remaining required funds. Despite the significant growth of interest and attention paid to Islamic finance in the last ten years (post the 2008 financial crisis), there had been no significant improvement in offering new Shari’ah compliant acquisition financing products, that can be used by Islamic banks to provide finance for the acquisition transactions performed by the Shari’ah compliant investment management and Shari’ah compliant private equity companies in the MENA region.This study focuses on proposing two Shari’ah compliant financial products, which are Murabahah based product, and Diminishing Musharakah based product, that can be used for acquisition financing in the Egyptian market, the first chapter covers the introduction of the study, and acquisition financing in addition to the literature review. The second chapter covers the market of acquisitions and Islamic banking in Egypt, while chapter three discusses the two proposed products, and the Shari’ah, legal, regulatory, and banking perspectives of the two proposed products, then the conclusions and recommendations of the study.