Equal provides the capability to tokenize various Islamic financial instruments that are fully compliant with Sharia norms. These instruments exclude riba (interest), gharar (excessive uncertainty), and haram (prohibited activities). They include:

1. Musharaka

Definition: Musharaka is a form of Islamic partnership where multiple parties contribute resources (capital, assets, labor) to jointly conduct business and share profits and losses based on pre-agreed ratios.

Key Elements:

• Capital Contributions: Each partner contributes capital (C₁, C₂, …, Cₙ).
• Total Capital: The sum of all contributions (T).
• Profit Sharing: Profits (P) are divided according to agreed-upon ratios (R₁, R₂, …, Rₙ).
• Loss Sharing: Losses are shared proportionally to capital contributions.

Profit Distribution Formula:

• Profit for each partner:
  • P₁ = P × R₁
  • P₂ = P × R₂
  • …

Loss Distribution Formula:

• Loss for each partner:
  • L₁ = (C₁ / T) × L
  • L₂ = (C₂ / T) × L
  • …

Example:

• Partners: 3
• Contributions: Partner 1: $100,000; Partner 2: $50,000; Partner 3: $50,000
• Total Capital: $200,000
• Profit: $40,000
• Profit Sharing: Equally among partners
• Profit for Each:
  • P₁ = $13,333
  • P₂ = $13,333
  • P₃ = $13,333

2. Mudaraba

Definition: Mudaraba is a partnership where one party (the investor or rab al-maal) provides capital, and the other party (the manager or mudarib) offers expertise and management. Profits are shared according to agreed ratios, while losses are borne by the investor unless due to misconduct by the manager.

Profit Distribution Formula:

• Investor’s Profit:
  • Pᵢ = P × Rᵢ
• Manager’s Profit:
  • Pₘ = P × Rₘ

Example:

• Investment: $100,000
• Expected Profit: $50,000
• Profit Sharing: Investor 70%, Manager 30%
• Investor’s Profit: $35,000
• Manager’s Profit: $15,000

3. Sukuk

Definition: Sukuk are Islamic financial certificates representing ownership in an asset, project, or investment, providing returns to investors without involving interest.

Profit Distribution Formula:

• Return per Sukuk:
  • R = (P × D) / N

Example:

• Total Sukuk Issued: 10,000
• Total Profit: $200,000
• Profit Distribution: 80%
• Return per Sukuk: $16

4. Istisna

Definition: Istisna is a contract where one party commissions another to manufacture or construct a specific item, with payment made progressively or upon completion.

Payment Formula:

• Payment at each stage:
  • Tᵢ = Vᵢ × C

Example:

• Total Cost: $100,000
• Payment Stages:
  • Stage 1 (30%): $30,000
  • Stage 2 (40%): $40,000
  • Stage 3 (30%): $30,000

5. Salam

Definition: Salam is a contract where the buyer pays in advance for goods to be delivered in the future.

Payment Formula:

• P = Q × F

Example:

• Advance Payment: $10,000
• Quantity: 50 tons of wheat
• Price per Unit: $200 per ton