Ovamba, a U.S.-based investment management firm, plans to support borrowers in the African small-to-medium-enterprise market with Sharia-compliant financing, according to a report in CPIFinancial

The company is promoting an Islamic financial experience that caters to business needs and growth developments, Ovambo said in a statement.

Ovamba connects African investors in the diaspora who want to lend money with African businesses that want to borrow, according to a profile on Gust, a global funding platform for sourcing and managing early-stage investments.

An investment of an unspecified amount by Ovamba will help strengthen its position, increase market share and accelerate expansion in Africa, the company said. It also expects to continue investing in new Islamic financial products such as Ijara, Wakala, Mudaraba and provide capital for enterprises, according to CPIFinancial.

Marvin Cole, founder and CEO at Ovamba, said, “Going forward we believe Islamic financial instruments will provide an excellent platform for building businesses of scale.”

Before starting Ovamba, Cole worked as a strategy consultant in the Johannesburg office of McKinsey and Co.. He advised pan-African banks on underwriting systems, and was a Deloitte private equity advisor. Cole founded Praxis Asset Management, an emerging markets private equity firm, and he brings best practice due diligence and deal structuring to the Ovamba platform.

To make sure it is Sharia-compliant, Ovamba has signed an agreement with Bahrain-based Shariyah Review Bureau. The oraganization sells advisory services, certification (fatwa), equities screening and sharia auditing, according to its website.

The Shariyah Review Bureau has a scholarly presence in 14 countries and is licensed by the Central Bank of Bahrain.

“Financing for trading productivity is not only essential for SMEs…it is urgently needed,” said Yasser S. Dahlawi, founder and CEO of SRB and overseer of global operations. “We believe Ovamba’s efforts will help open new venues of investments and augment the way trading is currently done in Africa.”

“This is an exciting new development and we hope to see it become a revolutionary trading platform and an engine of growth for small- and medium-size enterprises,” said Mansoor M. Ahmed at the Bahrain office of SRB, CPIFinancial reported.

The Islamic financial system encourages risk sharing, promotes entrepreneurship, discourages speculative behavior, and emphasizes the sanctity of contracts, according to the Institute of Islamic Banking and Insurance.

Interest, riba, or “exploitive gains made in trade or business” are prohibited in Sharia finance, although there is some disagreement over the definition of those terms, according to the Islamic Development Bank.

“Any guaranteed increase in return tied to the maturity and the amount of principal, regardless of the performance of the investment, would be considered riba and is strictly prohibited,” says the Institute of Islamic banking.

Islamic finance is growing fast, but until now, scholarly research has been confined to verifying that it’s different from conventional banking, said researcher Mansor H. Ibrahim. More research is needed to justify its viability beyond the statement that it’s different, Ibrahim said, according to ScienceDirect.

“Theoretically and empirically, demonstration (is needed) of its bearings on economic well-beings and policies such as economic stability, financial inclusion, economic development, and stabilization policies,” Ibrahim said in a scholarly report.

Based in Chevy Chase, Maryland, Ovamba describes itself as Africa’s debt marketplace.

Borrowers typically receive better rates and faster approvals on the Ovamba platform, the company said. Risk is distributed “evenly between lenders and investors which significantly reduces the cost and complexity of the SME lending landscape. These savings are passed on to the SMEs, giving them better access to capital at lower costs.”

According to the Institute of Islamic Banking, Sharia has evolved over the centuries, guided by three broad principles agreed upon by Islamic scholars. These are:

Interest of the community takes precedence over the interests of the individual.

Relieving hardship takes precedence over promoting benefit.

A bigger loss cannot be prescribed to alleviate a smaller loss and a bigger benefit takes precedence over a smaller one. Conversely a smaller harm can be prescribed to avoid a bigger harm and a smaller benefit can be dispensed with in preference to a bigger one.

Bloomberg describes Ovamba as an organization that “operates an online social/peer-to-peer lending site and debt matching platform that allows retail and institutional lenders to lend to and borrow from each other. ”

The company was incorporated in 2013 and is based in Chevy Chase, Maryland with additional offices in Douala, Cameroon; and Washington, D.C.

Sharia-compliant financial institutions are far from immune from risk, says Shariah Finance Watch, an organization that exposes the risks of Sharia financing.

Sharia Finance Watch cites Bank Saderat and Bank Melli — two of the largest Sharia-compliant banks in the world — that have been sanctioned for activities involving terrorism, according to a report in May.