A type of risk that is associated with an Islamic financial institution’s equity investments (investments in equity) such as stock purchases/ holdings (acquired from stock markets) and specific types of projects and portfolio investments that mainly constitute equity elements, by means of participatory arrangements (mudaraba, musharaka, wakala)

This risk involves other types of exposures: market risk, credit risk and liquidity risk, all in relation to the equity investment. Equity investment risk (EIR) is inherent in an entity’s holdings of equity instruments for investment purposes, or direct investments in equity of projects/ portfolios, baskets, etc.

This risk may arise from entering into a partnership (by contribution of equity shares entailing ownership stake and corresponding rights and obligations) for the purpose of carrying out or participating in a specific business, commercial, or financial activity, for which the provider of finance (holder of equity share, participatory party, partner, etc.) shares in the business risk of a partnership venture.