Capital protection (as distinct from a guarantee)
Using permitted methods to safeguard invested capital, which AAOIFI distinguishes from the manager guaranteeing it.
Capital protection means using permitted methods to prevent loss, decrease or destruction of invested capital. AAOIFI's standard on protection of capital distinguishes it from a guarantee, which is one party's undertaking to bear any loss, and says that an investment manager, whether mudarib, investment agent or managing partner, must exercise due diligence but may not be made unconditionally liable for losses other than those caused by its misconduct, negligence or breach. Products described as capital protected should therefore say how protection works and who, if anyone, stands behind it.
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This entry explains a term; it is not a Shariah ruling. Approving a product is for each institution's own Shariah board and regulator.