UK-based Simply Sharia has launched a green energy scheme that will sell Renewable Obligation certificates and electricity to the grid in partnership with Gardner Asset Management LLP (GAMllp) and Shariyah Review Bureau (SRB).

The Sharia-compliant Green Energy Enterprise Investment Scheme (EIS) is claimed to be the first of its kind in the Islamic financial world. The scheme is looking at owning a 2.4MW solar farm scheme that will be run by GAMllp.  

Commenting on the launch of the fund, Faizal Karbani, CEO of Simply Sharia said: “This will be the first certified Sharia-compliant Green Energy EIS offered to UK investors. We believe the structure of the investment fits very well with the values and principles of Sharia. We are using a structure common to Islamic finance known as an Investment Wakala, whereby an agent (Wakil) is appointed by investors to manage and run the investment on their behalf. For this project, GAMllp has been appointed as the Wakil, and will run the business for investors in return for a fee, comprising an annual management charge and a share of the profits. It is also the intention to operate without conventional interest bearing debt in the structure”.

Speaking to Solar Power Portal, Anas Hassan of Simply Sharia explained the key differences between traditional solar EIS schemes and Sharia-compliant ones. He said: “Traditional schemes are usually funded by a combination of equity and debt. Conventional debt results in interest payments, which are forbidden in Islamic finance. The Sharia scholars who are experts in Islamic finance do usually give some leeway in markets where Islamic finance is not prevalent (some say that up to 33% of total funding can be debt), but we are aiming to avoid debt funding and fund fully from equity on this project.

“Traditional schemes have a range of insurance policies in place. Conventional insurance is not Sharia compliant, so we are using an Islamic finance product called takaful to provide insurance-type protection (see here for further information on this).

“Traditional schemes hold cash at various points in the cycle (e.g. after funds have been raised and before the shares are issued). This cash is usually put into interest bearing accounts, which again is not Sharia compliant. We are seeking to use a Sharia compliant bank account which is non interest bearing.”

Hassan added that solar was picked for the project because it is consistent with Islamic faith and values, and the combination of EIS tax incentives and government support provide good returns.