What are the biggest challenges facing Muslims when they\u2019re trying to bank according to the practices of Islam? <\/strong><\/h3>\n\n\n\n![\"](\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/05\/641-1024x536.png\")
<\/figure>\n\n\n\nOne is about education and awareness, both for people who profess to be Muslim, as well as people of other faiths \u2014 about what it means to engage in a transaction that meets Islamic principles or tries to meet Islamic principles<\/strong>. There are some home-grown efforts in home finance, for example, and refinance, like Guidance and University Bank. <\/p>\n\n\n\nAnd then ones that offer investment options like Saturna and Azzad Asset Management, among others that bring socially responsible principles to bear along with the more technical aspects of Islamic commercial laws. <\/p>\n\n\n\n
There\u2019s a strong parallel between both impact and responsible investing and Islamic principles.<\/p>\n\n\n\n
According to Umar Moghul, a partner at law firm Roberts Moghul & Partners, both Muslims and non-Muslims alike struggle when it comes to information dissonance with finances. Investors can struggle when trying to find out whether whoever they\u2019re investing with is Shariah-compliant. <\/p>\n\n\n\n
\u201cThe elephant in the room that no one has sorted out is commercial financing, whether commercial real estate or business financing, like a working capital facility along Islamic lines\u201d added Moghul when asked about other challenges facing Islamic investors. <\/p>\n\n\n\n
\u201cIt’s been done before, typically for the larger investors, where the transactions are large enough to bear the transaction costs of putting something like that together. The more typical American Muslim financing is probably somewhere between a couple hundred thousand to four or five million. That’s kind of the sweet spot. And those transactions are so small that it\u2019s difficult to find a bank or borrower that’s willing to bear those transaction costs, both for education, awareness, legal costs, etc.\u201d
Ibrahim Warde in the meantime, says that the challenge for Muslims in non-muslim countries <\/strong>is the lack of Islamic financial instutions in those countries<\/strong>.<\/p>\n\n\n\n\u201cThere are maybe 10 or so [In the U.S.]. There are a few areas where those banks are quite active. One of them is Islamic mortgage and another is Islamic investing, in the sense of mostly mutual funds, so these tend to have a screening mechanism, where they would screen out all the stocks that would be problematic from an Islamic perspective. In the context of the U.S. these are among the most significant forms of Islamic investments that are commonly done,\u201d Warde said. <\/p>\n\n\n\n
Saturna Sdn. Bhd.\u2019s President and Executive Director, Monem Salam, however, says that the issues of Islamic investing are more basic than that.<\/p>\n\n\n\n
\u201cOne of the biggest challenges is that there\u2019s no particular banking product that\u2019s available that doesn\u2019t give you an interest rate. They\u2019re all based on interest. That\u2019s one issue. Across the gamut of whatever the financial products are, you\u2019re going to find some holes that need to be filled. On the mortgage side of things, there are very few options for a jumbo mortgage [where the loan amount is higher than the conforming loan limits],\u201d said Salam.<\/p>\n\n\n\n
So what should one keep in mind when looking for institutions\/companies that are compliant with Islamic financial principles?<\/strong><\/h3>\n\n\n\n![\"influential](\"https:\/\/ethis.co\/blog\/wp-content\/uploads\/2022\/05\/651-1024x536.png\")
<\/figure>\n\n\n\nAccording to Mughol, Muslims should look out whether institutions or companies have a Shariah review board<\/strong>, with more than three people on board. \u201cYou want to see if the organisation adheres to any best standards or best practices, like those set out by AAOIFI, the Accounting and Auditing Organisation for Islamic Financial Institutions [in the U.S.]. <\/p>\n\n\n\nYou also want to look at the biographies of the people on the board. Are they seasoned experts? What\u2019s their background experience in business and finance, and what\u2019s their background in understanding your own local cultural context? <\/p>\n\n\n\n
Are they familiar with living in the U.S. and the realities and facts on the ground that differ from country to country?\u201d.<\/p>\n\n\n\n
Warde says that Muslim\u2019s need to be educated and aware what is halal and non-halal. <\/p>\n\n\n\n
\u201cThe overriding principle is, basically, that you cannot make money with money. So interest is a bit problematic, although there are ways to get around that,\u201d Warde said. <\/p>\n\n\n\n
In Islam, the real economy and certain forms of finance, such as leasing, are connected, and that is fine. However, if you\u2019re an investor and there\u2019s no tangible product or service that can be seen from a prospective investment, be careful as it could possibly both be non-Halal, and possibly a scam.<\/p>\n\n\n\n
Salam brings it back to how essential it is that a company has a Sharia advisory board \u201c…that\u2019s overseeing their investments and contracts, and they\u2019re signing on them, almost like an audit. So whether it\u2019s 31% or 32%, it matters less, because you\u2019re still in the realm of halal, as long as it\u2019s been signed off. So normally what will happen is the financial institution will have a Sharia letter on their website\u201d.<\/p>\n\n\n\n
As muslims investors and financial planners, there are plenty of details that we must pay attention to. Hopefully these tips can help to make the challenges of managing finances in accordance with your faith a little easier.<\/p>\n
<\/div> ","protected":false},"excerpt":{"rendered":"
<\/figure>\n\n\n\nOne is about education and awareness, both for people who profess to be Muslim, as well as people of other faiths \u2014 about what it means to engage in a transaction that meets Islamic principles or tries to meet Islamic principles<\/strong>. There are some home-grown efforts in home finance, for example, and refinance, like Guidance and University Bank. <\/p>\n\n\n\n And then ones that offer investment options like Saturna and Azzad Asset Management, among others that bring socially responsible principles to bear along with the more technical aspects of Islamic commercial laws. <\/p>\n\n\n\n There\u2019s a strong parallel between both impact and responsible investing and Islamic principles.<\/p>\n\n\n\n According to Umar Moghul, a partner at law firm Roberts Moghul & Partners, both Muslims and non-Muslims alike struggle when it comes to information dissonance with finances. Investors can struggle when trying to find out whether whoever they\u2019re investing with is Shariah-compliant. <\/p>\n\n\n\n \u201cThe elephant in the room that no one has sorted out is commercial financing, whether commercial real estate or business financing, like a working capital facility along Islamic lines\u201d added Moghul when asked about other challenges facing Islamic investors. <\/p>\n\n\n\n \u201cIt’s been done before, typically for the larger investors, where the transactions are large enough to bear the transaction costs of putting something like that together. The more typical American Muslim financing is probably somewhere between a couple hundred thousand to four or five million. That’s kind of the sweet spot. And those transactions are so small that it\u2019s difficult to find a bank or borrower that’s willing to bear those transaction costs, both for education, awareness, legal costs, etc.\u201d \u201cThere are maybe 10 or so [In the U.S.]. There are a few areas where those banks are quite active. One of them is Islamic mortgage and another is Islamic investing, in the sense of mostly mutual funds, so these tend to have a screening mechanism, where they would screen out all the stocks that would be problematic from an Islamic perspective. In the context of the U.S. these are among the most significant forms of Islamic investments that are commonly done,\u201d Warde said. <\/p>\n\n\n\n Saturna Sdn. Bhd.\u2019s President and Executive Director, Monem Salam, however, says that the issues of Islamic investing are more basic than that.<\/p>\n\n\n\n \u201cOne of the biggest challenges is that there\u2019s no particular banking product that\u2019s available that doesn\u2019t give you an interest rate. They\u2019re all based on interest. That\u2019s one issue. Across the gamut of whatever the financial products are, you\u2019re going to find some holes that need to be filled. On the mortgage side of things, there are very few options for a jumbo mortgage [where the loan amount is higher than the conforming loan limits],\u201d said Salam.<\/p>\n\n\n\n According to Mughol, Muslims should look out whether institutions or companies have a Shariah review board<\/strong>, with more than three people on board. \u201cYou want to see if the organisation adheres to any best standards or best practices, like those set out by AAOIFI, the Accounting and Auditing Organisation for Islamic Financial Institutions [in the U.S.]. <\/p>\n\n\n\n You also want to look at the biographies of the people on the board. Are they seasoned experts? What\u2019s their background experience in business and finance, and what\u2019s their background in understanding your own local cultural context? <\/p>\n\n\n\n Are they familiar with living in the U.S. and the realities and facts on the ground that differ from country to country?\u201d.<\/p>\n\n\n\n Warde says that Muslim\u2019s need to be educated and aware what is halal and non-halal. <\/p>\n\n\n\n \u201cThe overriding principle is, basically, that you cannot make money with money. So interest is a bit problematic, although there are ways to get around that,\u201d Warde said. <\/p>\n\n\n\n In Islam, the real economy and certain forms of finance, such as leasing, are connected, and that is fine. However, if you\u2019re an investor and there\u2019s no tangible product or service that can be seen from a prospective investment, be careful as it could possibly both be non-Halal, and possibly a scam.<\/p>\n\n\n\n Salam brings it back to how essential it is that a company has a Sharia advisory board \u201c…that\u2019s overseeing their investments and contracts, and they\u2019re signing on them, almost like an audit. So whether it\u2019s 31% or 32%, it matters less, because you\u2019re still in the realm of halal, as long as it\u2019s been signed off. So normally what will happen is the financial institution will have a Sharia letter on their website\u201d.<\/p>\n\n\n\n As muslims investors and financial planners, there are plenty of details that we must pay attention to. Hopefully these tips can help to make the challenges of managing finances in accordance with your faith a little easier.<\/p>\n
Ibrahim Warde in the meantime, says that the challenge for Muslims in non-muslim countries <\/strong>is the lack of Islamic financial instutions in those countries<\/strong>.<\/p>\n\n\n\nSo what should one keep in mind when looking for institutions\/companies that are compliant with Islamic financial principles?<\/strong><\/h3>\n\n\n\n
<\/figure>\n\n\n\n