Britain’s first Shariah compliant Seed Enterprise Investment Scheme (SEIS) has raked in £1 million in less than 14 days.
Shariah rules bars investors from receiving fees or commission for lending money, while the business receiving the cash must not offer goods or services that are contrary to Islamic religious principles.
This makes SEIS an ideal candidate for Shariah compliant finance as investors take an equity stake in a startup business and make a profit by selling shares if the business is a success at the end of the three-year investment.
SEIS is a generous tax-incentivised scheme that offers no interest or commission, while investors can opt for companies that trade in Shariah compliant markets.
Islamic finance for business
The SEIS is collaboration between IFAAS, an international Islamic finance consultancy, Portillion Capital, a financial services firm and Seed Mentors, a startup consultancy.
Although the Shariah compliant fund is aimed at Islamic investors, only a fifth of those contributing to the first tranche of funding are Muslim.
Farrukh Raza, the managing director of IFAAS, said “We are proud to have a place at the leading edge of the Islamic finance industry.
“Everyone involved is dedicated to devising innovative Shariah compliant financial services solutions for our clients.
“This is the first Shariah compliant SEIS in the UK and the demand has been outstanding. Although the first tranche of funding is complete, we are planning several more in a short time.
“The interest in SEIS is significant as the call for Islamic funding in the UK and Europe is rising.”
SEIS tax breaks
SEIS offers investors who are UK taxpayers a range of tax breaks.
For every £1 of equity in a SEIS company, investors are rewarded with up to 50p income tax relief and 14p capital gains tax relief – and if the startup fails to take off, another 22.5p of loss relief against other income is also available.
The combined 86.5p relief against every £1 invested significantly reduces the risk of taking equity in a startup.
Kamran Sattar, chief executive officer of Portillion Capital said: “David Cameron told the Islamic world that British Muslims should not feel barred from starting a business because they cannot get funding due to their religion.
“We hope this fund encourages Muslims to become entrepreneurs and to make that vision a reality.”