Al Baraka Capital, INVIA Launch Sharia Fund for Small Businesses in Egypt

Al Baraka Capital, the Islamic financial services arm of Al Baraka Bank, in collaboration with fintech firm INVIA, has taken a significant step in advancing Egypt’s Islamic finance sector. Together, they have launched Egypt’s first Sharia-compliant investment fund specifically designed to finance small industrial companies. The fund is a critical initiative to support economic growth while adhering to Islamic financial principles, providing much-needed financial and technical support to businesses in the industrial sector.

Al Baraka Capital: A Strategic Move for Small Businesses

As Sarah Hosni, Managing Director of Al Baraka Capital, shared with Al Mal News, the fund’s initial phase will allocate EGP 200 million to finance 20 small industrial businesses. In exchange for the financing, the fund will receive a share of each company’s revenues, ensuring the structure complies with Sharia law, which prohibits interest-based transactions. Instead, it fosters risk-sharing between the investor and the business, a hallmark of Islamic finance.

This type of investment model is essential in Egypt’s evolving economic landscape, where small and medium-sized enterprises (SMEs) play a crucial role. According to recent data, SMEs account for over 80% of the country’s private-sector employment, making them a vital part of the national economy. Yet, many of these businesses struggle to access traditional financing due to high interest rates or the absence of collateral. Al Baraka Capital’s fund aims to bridge this gap by offering Sharia-compliant financing that is more accessible and aligned with Islamic principles.

Hosni emphasized that the fund’s goal is not just about providing capital but also delivering essential technical support to these businesses. This dual approach—offering financial backing alongside business expertise—sets the fund apart as a holistic initiative aimed at empowering small firms to grow and thrive.

Yehia Ashour, CEO of INVIA, reiterated this sentiment, pointing out that technical support is crucial for these companies, particularly those in the early stages of development. INVIA’s involvement brings valuable fintech solutions to streamline the investment process and support the long-term sustainability of the businesses.

Scaling Up for Future Growth

While the fund’s initial size is EGP 200 million, Al Baraka Capital has ambitious expansion plans. Hosni revealed that the company aims to grow the fund to a staggering EGP 1 billion by the end of 2025. This growth will enable the fund to reach even more small businesses, providing them with the capital and resources they need to scale up their operations.

The company’s expansion plans are a reflection of the increasing demand for Sharia-compliant financial products in Egypt. As more businesses look for ethical financing options that align with Islamic values, the need for funds like this one will continue to grow. By 2025, the fund could become a major player in the Egyptian financial landscape, supporting hundreds of small industrial firms across various sectors.

One of the key steps in reaching this goal is the establishment of a risk capital firm, which is currently in progress. Al Baraka Capital is working closely with the Financial Regulatory Authority (FRA) to complete the necessary regulatory procedures. Once finalized, this new venture will provide additional avenues for investment and risk management, further strengthening the company’s position in Egypt’s growing Islamic finance sector.

The creation of a risk capital firm is an important development for Al Baraka Capital, as it will allow the company to engage in more diversified investment strategies. By spreading risk across different sectors and types of businesses, the firm can ensure a more stable and sustainable investment portfolio, benefiting both the investors and the small businesses it supports.

Expanding Into New Sectors with Sukuk Issuances

In addition to its work with small businesses, Al Baraka Capital is actively exploring new areas for Sharia-compliant investment. Hosni revealed that the company is preparing to launch three new sukuk issuances in early 2025, two of which will be green sukuk. These environmentally-focused financial instruments are designed to raise capital for projects that have a positive environmental impact, aligning with global trends towards sustainable finance.

The total value of these sukuk issuances is expected to reach EGP 9 billion, signaling a significant commitment to both Islamic finance and sustainability. Green Sukuk, in particular, has gained attention in recent years as more investors seek to align their portfolios with environmentally friendly practices. For Al Baraka Capital, this move represents an opportunity to attract investors interested in both ethical finance and environmental sustainability.

Globally, the demand for green finance is growing, with estimates suggesting that the market for green bonds and sukuk could reach $1 trillion by 2030. Egypt has also been making strides in the green finance sector, with the government issuing its first sovereign green bond in 2020. Al Baraka Capital’s green sukuk issuances will contribute to this trend, offering Sharia-compliant investment opportunities that align with the global push for sustainability.

A New Sharia-Compliant Sports Fund

Al Baraka Capital is not stopping at industrial and green projects. According to Hosni, the company is also in discussions with several institutions about launching a Sharia-compliant sports fund. While the specifics of the fund are still under consideration, the final decision is expected to be made by the second quarter of 2025.

This new fund could open up exciting opportunities for investment in Egypt’s rapidly growing sports sector, providing financial backing for projects that align with Sharia principles. Whether it’s building new facilities, supporting athletic programs, or financing other sports-related ventures, the fund would aim to support the development of Egypt’s sports industry while adhering to Islamic finance guidelines.

Egypt’s sports sector has seen a surge in investment in recent years, particularly in football, which remains the country’s most popular sport. A Sharia-compliant sports fund could capitalize on this growing interest, providing financing for sports infrastructure, training programs, and sponsorships that comply with Islamic law. The sports fund could also attract a new class of investors interested in promoting both ethical finance and athletic excellence.

The Growing Influence of Islamic Finance in Egypt

The launch of this Sharia-compliant fund is part of a broader trend in Egypt towards expanding Islamic finance options. As demand for ethical and Sharia-compliant financial products grows, institutions like Al Baraka Capital and their fintech partners, such as INVIA, are leading the way in offering innovative solutions that meet both religious and financial needs.

Islamic finance is growing rapidly in Egypt, with estimates suggesting that the sector could be worth more than $25 billion by 2025. This growth is being driven by an increasing awareness of ethical finance, as well as government initiatives to promote Islamic banking and investment products. Al Baraka Capital’s new fund is well-positioned to capitalize on this trend, offering a range of Sharia-compliant investment opportunities that cater to the needs of small businesses and investors alike.

The partnership between Al Baraka Capital and INVIA represents the blending of traditional Islamic finance principles with modern fintech innovation, creating a dynamic approach that can adapt to the evolving needs of businesses in Egypt. The focus on small firms, technical support, and ethical investments positions the fund as a key player in driving economic growth, job creation, and sustainability in the country.

With the launch of Egypt’s first Sharia-compliant fund for small industrial firms, Al Baraka Capital is setting a precedent for how Islamic finance can play a crucial role in supporting the economy. As the company expands its fund size and explores new opportunities in sectors like green finance and sports, it is clear that Al Baraka Capital is committed to driving innovation within Egypt’s financial landscape.

The combination of financial backing, technical support, and adherence to Islamic principles ensures that the fund is not only profitable but also socially responsible. This approach, along with the planned sukuk issuances and sports fund, highlights the growing potential for Sharia-compliant investments in Egypt, paving the way for a more inclusive and sustainable financial future.

As more businesses and investors turn to ethical finance options, funds like the one launched by Al Baraka Capital will play an increasingly important role in shaping the future of Egypt’s economy. Through a combination of innovative financial solutions, technical support, and a commitment to Islamic values, Al Baraka Capital is positioning itself as a leader in the Egyptian financial sector.