Islamic Redeemable Preference Shares

Islamic Redeemable Preference Shares (RPS-i) are a popular investment option in Malaysia that adheres to the principles of Shariah. RPS-i is a hybrid security that combines the features of both equity and debt instruments. In this article, we will explore the Shariah principles that RPS-i is based on and how it differs from traditional securities. The principles of Shariah, which are the Islamic ethical and moral codes, prohibit the payment or receipt of interest (Riba). The principles also emphasize fairness, equality, and ethical conduct in all business transactions. In the context of securities, Shariah-compliant investments must comply with these principles.

IBC’s RPS-i requires a minimum investment of RM250,000, which offers investors an attractive investment opportunity within Islamic finance principles. These preference shares come with a tenure of five years, including a lock-in period of three years. Investors can expect a target return of 10% per annum, distributed semi-annually as non-taxable dividends. One notable advantage of RPS-i is that they incur zero processing or management fees, making them a cost-effective investment option. With their emphasis on Sharia-compliant practices and the potential for steady returns, RPS-i presents a compelling investment avenue for those seeking halal investment opportunities.

Islamic Redeemable Preference Shares

RPS-i is a type of preference share that represents a form of ownership in a company. As a preference share, RPS-i entitles the shareholder to receive dividends at a targeted rate. However, RPS-i is also a redeemable security, which means that the issuer has the option to buy back the shares from the shareholder at a predetermined price at a later date. The dividends paid to RPS-i holders are based on the profits generated by the company rather than interest. This is because, under Shariah principles, profits earned by a company are deemed to be a fair and ethical way of generating returns for investors. The targeted rate of dividends is agreed upon at the time of issuance of the RPS-i and has a priority in dividend payments. RPS-i shareholders will be paid first before ordinary shareholders

Another key Shariah principle that RPS-i adheres to is the concept of risk-sharing. Unlike traditional debt instruments, where the borrower bears all the risk, RPS-i holders share the risk with the issuer. This risk sharing is because RPS-i dividends depend on the profits generated by the company, which means that if the company makes losses, the RPS-i dividends will also decrease or stop. Again, this aligns with the principles of fairness and equality in business transactions.

Furthermore, RPS-i is structured in a way that complies with Shariah principles regarding the use of proceeds. For instance, the proceeds from the issuance of RPS-i must be used for Shariah-compliant purposes, such as financing productive assets, rather than non-Shariah-compliant activities (e.g., gambling or alcohol production).

In conclusion, RPS-i is a popular investment option in Malaysia that adheres to the principles of Shariah. RPS-i is a hybrid security that combines the features of equity and debt instruments. Moreover, it is structured in a way that complies with Shariah principles regarding the prohibition of interest, risk-sharing, and the use of proceeds. As such, RPS-i is a popular investment option for those seeking Shariah-compliant investment opportunities.

#InternationalBusinessCapital #ShariahCompliant #IslamicRedeemablePreferenceShares

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