By Marta Lillo
For EB-5 investors who are Muslim, the necessity for investment alternatives that cater to their unique needs rises. Such is the case of Sharia-compliant investments for investors following the religion of Islam interested in this type of investing.
Sharia-compliant investments are a type of socially responsible investment that adheres to the principles of Islam. They are based on the Islamic law, the Sharia, which prohibits financial interest, speculation, and gambling. It also bans earning profits from selling alcohol, pork products, pornography, military equipment, or weapons.
According to Ahmed Haggag, senior VP of Shariah Investments at Walton, the demand for Sharia products dates back many years. “This is why Islamic finance houses are thriving in the Muslim world,” he says.
Regarding current interest in EB-5 investments aligning with Sharia principles, Farah Abbas, principal attorney at Abbas Law, suggests that these types of investments in the evolving EB-5 industry become a feasible option for investors seeking specific investment parameters.
“With the RIA [EB-5 Reform and Integrity Act of 2022] coming into effect last year and the investment minimums being raised, tapping into new markets that may not have considered this program before could bring some welcome interest to EB-5. It’s possible there are existing projects out there on the market already that may qualify as Sharia-compliant. So, some Regional Centers may be in a position to seek Sharia certification to simply focus their marketing efforts on regions where they may not have had much traction in the past without having to develop new projects or completely change their investment terms,” Abbas says.
Rana Jazayerli, founding attorney at Jazayerli Law LLC, also believes that many EB-5 projects in the market today are probably Sharia-compliant already.
“It is very likely that many existing projects are already Sharia-compliant without realizing it. At least, I would think that the equity-based projects are since they do not involve an interest payment based on a loan,” she says. Jazayerli clarifies that she’s not an expert on Sharia law or investments.
Introducing Sharia compliance into EB-5 project development
In early 2023, Walton launched an EB-5 business line to investors, including Sharia-endorsed investments, to address this global consumer demand.
Haggag explains that “Walton didn’t create a separate EB-5 Sharia-compliant product; instead, Walton’s conventional EB-5 product was certified as Sharia-compliant.”
He insists that the framework under which Sharia investments take place benefits all types of investors, not only Muslims who follow Islamic law in their investments.
“In reality, everyone involved benefits from Sharia compliant investments, some examples of these benefits [are]: they lower economic inequality; increase market participation; encourage economic growth and stability in investments; reduce adverse effects of harmful products and services; higher resilience in economic uncertainty.”
As to how an EB-5 investment could become Sharia-compliant, Haggag explains that “the earlier the Sharia structure is incorporated in the product development, terminology, and PPM [Private Placement Memorandum], the less costly this endeavor becomes and the faster the process of certification.”
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