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The Rise and Fall of Gulf Finance House

The Rise and Fall of Gulf Finance House
By Mohammed Khnifer, Aatef Baig, and Frank Winkler
Reading University, May 2010

This paper dissects the balance sheet and business model of Gulf Finance House (see GFH dividend/stock price chart), and scrutinizes the existence of a "pre-exit premium" in their activities - on top of the usual exit fees and/or performance fees. The study suggests that this practice (uncommon even for conventional Private Equity businesses - much less for an Islamic Private Equity house) was pioneered by GFH and it is this same practice that brought them down to their knees. This is perhaps the first case study wholly dedicated to GFH, and it goes on to suggest that there is a connection between the Murabaha model and their Islamic Private Equity model.

Many thanks to Mohammed Khnifer for sharing their paper.

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