Frequently Asked Questions (F.A.Q.)

What does "Ittihad" mean?

Ittihad is an Arabic word meaning "united." i.e. Etihad Airways based in UAE (no affiliation)

Does Ittihad provide residential or commercial mortgages?

Ittihad does not provide mortgages or financing of residential or commercial properties. While we do provide financial services to expanding, viable and ethical business ventures, our services takes place under a joint venture profit or loss model, or share ownership basis (Sharika). Since there is no credit involved, no ‘interest’ is charged by Ittihad or remitted to investors. Ittihad earns a return on their investment through either a dividend that the issuing firm may or may not declare from time to time, and / or through any capital appreciation of their shares.

What are ‘Socially Responsible’ or Ethical Investments?

Socially Responsible Investing is a movement led by investors, for other investors who pay more attention to where their money is being ultimately invested. For many investors, it is no longer good enough to know only the name of their mutual fund holdings or stockbroker. They wish to invest in businesses that bring something positive to society and wish to align themselves with investment firms that cater to this need.

As a simple example that assumes equal financial viability, imagine a choice between investing in a company that produces known toxins and another company that provides toxin-cleanup services. We believe most people, if given a choice, would choose to invest in the latter enterprise. The problem they face however is that there are few forums where they can make that choice and even fewer firms that will help them identify such opportunities. Traditional mutual funds, for example, do not allow investors to choose which firms their money is invested in. Similarly, most brokers and advisory firms do not have the freedom or know-how to discriminate between firms that will benefit society and firms that may ultimately bring harm.

At Ittihad, we neither encourage nor engage in business with firms involved in sectors such as armaments, gambling, adult entertainment, alcohol and tobacco. We look at potential investments from both a value and financial perspective. This is more than just our specialty – it is our very reason for being.

How is Islamic financing Socially Responsible?

Islamic (or Sharia) financing/banking prohibits the collection of interest and trading of finances, which is considered a form of gambling. Islamic financing doesn’t allow investments into companies that are unlawful and have no ethical or moral obligation to the society.   

What is the benefit of dealing with Ittihad Capital Corporation?

Ittihad Capital Corporation has built a strong foundation of Socially Responsible Investments (SRI) with its clients. Its mandate is to continue to provide interest-free solutions to build continuous relationships for future growth of its clients. With a highly motivated and skilled team, that has an in depth knowledge and insight into the financial and investments sector. 

What are the benefits of Islamic finance compared to conventional finance?

The benefits of Islamic financing are interest-free and social responsible investments. Payments are fixed for the entire term and cost-plus terms. As opposed to conventional financing, there are minimal service fees and no interest charges.

What are some industries that Ittihad Capital Corporation conducts business with?

Ittihad Capital Corporation has done business in the industries of healthcare, real estate, construction, transportation, consumer products and financial service sector.

What are the benefits of Joint-Venture (Sharika) finance as compared to conventional interest-based finance?

This is a question that invites much debate in financial circles and academia. While we cannot do justice to the debate by reproducing it here, we can nevertheless summarise our view on the matter and let our investors decide.

Conventional interest-based loans or financing, at a minimum, requires repayment of debt + interest. From our perspective, the debtor and the financier have very different incentives. As the incentive for the financier is to ensure repayment (loan + interest) come what may, this conflicts with the debtor’s ability to manage cash-flow and expansion of the firm. In any negative cash flow period, the debtor is left at the mercy of the financier, who can easily recall the loan. At such a time, while loan repayment may be possible after the sale of capital or real estate assets, it may also result in premature bankruptcy. This would literally evaporate any accumulated value in the business as relationships are sundered, people are left unemployed and productive assets are sold for pennies on the dollar. In this way, although the debtor bears all business-risk, the financier is the one that enjoys the reward.

On the other hand, if this transaction is built as a joint venture, we manage to better align the incentives of the parties involved. The firm that requires capital raises money directly from investors by selling them a part of the business. Both the business and the investors have an incentive to grow the business. Neither party has the ability or the incentive to prematurely call a loan, enforce a buyout etc. Both parties share in the profits or losses of the business, bearing a more equitable distribution of both risks and rewards. Negative cash flow periods that are transitory do not automatically trigger bankruptcy, ultimately allowing for a hardier and more sustainable business. From the perspective of our investors, they make a choice to invest in a debt-free business as opposed to highly-indebted ones.

The other benefits relate to the impermissibility of dealing in ‘interest’ (a kind of Riba) for members of the Islamic faith, members of some Christian denominations and also members of movements such as LETS, Social Credit etc. For people that are members of such groups, our profit and loss sharing model is a viable method through which they can put their hard-earned savings to work.


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