Ethical Equity Finance Solutions | Sharia-Compliant

Islamic Finance And Money Management

Islamic finance sets out principles for Muslims to follow when it comes to managing their money, investments, and assets. Managing money in a Sharia compliant way is not part of the ethical framework of Islam, but also serves as a guideline for Muslims to follow when transacting and managing finances.

The aim of Islamic finance is to ensure that financial dealings are not speculative, exploitative, or unfair. Instead, the focus is on creating an ethical financial economic system and markets that promote equality, social welfare, and justice within the economy and outside of it.

Every Muslim, business, and industry should follow Islamic finance principles when dealing with money. This is not only a religious requirement, but also an ethical one.

Traditional methods of money management focus on growing wealth and often this is based on interest and speculative investments. Islam is the opposite. It teaches people to manage their money in a reasonable and ethical way.

Islamic Finance - The Holistic Approach

Islam encourages a holistic approach to life. This includes having a wide lens when it comes to financial transactions and wellbeing. When it comes to money, Islam takes a holistic approach that goes far beyond focusing on the economy and markets.

Instead, the Sharia approach aims to emphasize socially responsible, ethical, and spiritual dimensions that align with the wider principles of the faith.

Let's have a look at the aspects of the holistic approach taken by Islamic finance:

• Social responsibility: this is key for Muslims in all aspects of their lives, but especially when it comes to money, payments, economic growth, and activity. The focus is placed on ensuring that people behave in such a manner so as to alleviate poverty and redistribute wealth.
• Ethics: like social responsibility, ethical conduct is a key component of the holistic approach of Islamic finance. Honesty, fairness, and transparency are widely encouraged when it comes to money management. Islam aims to ensure that people and societies as a whole benefit from money (hence the reason interest is strictly prohibited as it is seen as being rooted in the concept of unfairness).
• Intention: the niyyah (intention) behind money management decisions is important for Muslims. The aim is for transactions to be carried out with intentions that focus on ethical conduct and fairness. The idea behind this is that wealth comes from Allah so it should not be used to produce unfairness.
• Consumption and lifestyle: Islamic finance is not simply about how we manage money. Islam requires us to carefully consider our consumption, to avoid over consumption, understand the concept of wealth management, and to behave ethically. Muslims should make mindful and meaningful purchases and not spend frivolously.
• Wealth distribution: an important element of Islam is education and understanding in relation to the principle of sharing wealth. Through the obligations of zakat and charitable paying, Islam places great emphasis on ensuring that wealth passes from the rich to the poor.
• Real economic activity: investments in Islam cannot be speculative or ambiguous. Transactions must be based on a fair agreement with real asset backed and tangible items.

Trends In Islamic Finance

As the landscape of the globe changes with the introduction of digital banking and mobile banking, so too the Islamic finance landscape is changing. More and more people want to save, invest and store money in an ethical way and Islamic finance offers this ethical approach.

Sharia compliant money management offers people with a conscience the opportunity to manage their finances in a way that not only benefits themselves but also those around them.

There is currently an upward trend in the demand for ethical financial services, and Islamic finance is built on ethics and socially responsible finance.

In the UK, The Islamic finance industry is growing fast. This industry not only serves Muslims as individuals and business owners, but also serves Muslims from across the world including the Middle East and other Muslim territories. The Muslim fintech market is growing fast, and research indicates that this will be a key growth area in the coming decade with the fast rise of digital banking.

In addition, the green and sustainable industry is also seeing huge growth. Incorporating Islamic finance with green investment is the perfect alliance as both industries offer each other the perfect ethical partner.

Money Matters In Halal Business Ventures

When it comes to managing finances in business in a Sharia compliant way, it requires more than financial acumen. What is needed is a good understanding of Islamic finance principles. This includes knowing why interest is haram, and how to run your business so it is compliant with Sharia rules.

From opening your business bank account, to making deposits and withdrawals, there are many Islamic finance options available to people. Financial institutions understand the need to cater to those wanting to manage money in a Sharia compliant and ethical way.

Problem Solving Strategies In Islamic Money Management

The starting point is to always ensure that you live a Sharia compliant lifestyle. Whether you are a consumer, customer, business, corporation, or homeowner, there are principles set out to guide you.

Other strategies to help you include:

• Follow the Islamic finance principles when it comes to all and any financial dealings. When in doubt, seek guidance from scholars and financial advisors who are knowledgeable about Islam and Sharia rules.
• Review and adjust accordingly: assess and review your investments and finances regularly and don't assume everything you do is compliant.
• Address debts quickly: it is very easy to take out a loan and fall into debt. Debt that is interest based should be avoided at all costs. Think about the need and value of the purchases you make and do not rely on security that is interest based.
• Zakat: plan and prepare for your zakat payments. This will ensure you are constantly reviewing your finances and preparing for your zakat payments through the year.
• Income: ensure any income generated is halal.

Balancing Money And Morality In Islam

Balancing money and morality in Islam is not difficult. The Islamic finance principles give you a great foundation from which to align your finances with Islam. Make sure you understand these rules and apply them.

The main thing you can do is to avoid interest. It is strictly forbidden. In addition to this, you should prioritise halal earnings and avoid engaging in activities that are deemed to be forbidden.

Fulfilling your zakat obligations is a means through which you can fulfil your rights as a Muslim and share your wealth ethically. Practice disciplined budgets to ensure that your finances do not run away with you and you have the financial security you need through the year.

Always avoid excessive risk and speculation. Be cautious when engaging in any financial dealings that include any element of speculation of gambling.

Instil and teach Islamic values to those around you and ensure that those in your life, whether on a personal or professional level, share your values.

Banking Solutions For Muslims

Look out for banking solutions, products, and services that offer Islamic finance options for Muslims. These days it is not hard to find Sharia compliant bank accounts, mortgage products, loans, and investment options.

There are even Islamic insurance services and wealth management services. So, there is no reason to not do your research and ensure that your money management aligns with the teachings of Islam.

Qardus Ltd do not provide financial or investment advice.

The current cost of living crisis in the United Kingdom is affecting everyone. For many households, this is the highest squeeze on their finances that they have experienced. Many people are being forced to take measures in order to stay afloat. The cost of food, goods, and utilities are continuing to rise at an alarming rate, and people are having to make smart financial decisions.

According to recent statistics, up to 18 million households could face fuel poverty by January 2023 due to the ongoing energy crisis. Many of these families will have to decide between heating and eating. Investment bank Citi estimates that the UK consumer price inflation could reach 18% by early 2023. This will not only affect the finances of couples, and families with children, but almost everyone in the country.

This is why it is vital that you make smart financial decisions that could help you ride out this current cost of living crisis.

Let's have a look at some of the ways in which you can make your money go further.

Plan And Budget

One of the best things you can do is prepare a spending and budgeting plan. This will help you identify if you are overspending and examine those areas where you can cut back and save costs.

For example, do you still need to have a full Sky TV package? Can you get a cheaper broadband deal? Do you have any subscriptions that you no longer need or use?

Go through each direct debit and see if you can reduce or remove it. Check what you are paying for your smartphone packages and see if these can be reduced in any way. Ring your providers and ask them if they have any better deals on offer that could lower your costs.

Track all of your expenses and payments. This is the only way that you can successfully budget. Information and knowledge are power so use them to your advantage. Create a spreadsheet or table that lists all your incomings and outgoings, and then have a close look at where your money is going.

Muslims will already be used to the concept of planning and budgeting as they have to reconcile their finances and accounts every year in order to calculate their zakat calculations.

However, it is a good idea to keep a more regular eye on your finances, and remember that any drop in your income and savings may also affect your zakat and sadaqa payments.

Live Within Your Means

This is really important. It sounds so simple, but many people in the UK live beyond their means and this means they will struggle during the recession.

Having debt is not so much of a problem when times are going well. However, if you fail to make your repayments things could go wrong very quickly.

There is a famous Arabic proverb that states 'cut your coat according to your cloth'. Essentially, this encourages us to live within our means and not overstretch ourselves financially.

Islam does not look favorably on those who spend excessively and keep increasing their debt. We should all be looking at how we make use of our resources and expressing empathy for those less fortunate. Managing our finances well is something everyone needs to do, and needs to learn to do better.

Pay Off Debts

It might sound obvious but it is vital that you pay off any debts that you are able to. There are many online debt advice helplines that offer you recommendations and a guideline to help you reduce your debts.

You should prioritize paying off any debt, especially if it is a debt that accrues interest. Interest is not only strictly prohibited in Islam, but is also detrimental on your finances as the interest rates are likely to continue to increase.

If you can, pay off your debts.

Do Not Accrue New Debt

If you are thinking of taking on a new loan or new debt then think twice. Especially if the debt will be accrued due to a purchase that you do not necessarily need.

The same applies to buying things using your credit card. Now is not the time to be accruing more debt that incurs interest.

Start Saving Now

If you can, start saving now. It is never too late to start saving. Good financial management not only means monitoring your spending habits, it also means looking at your savings strategies.

You may need to undertake an evaluation of all your incomings and outgoings to see if there is anything you have left to save. If you do, even if it is a small amount, it is never too late to start saving.

If you do not have an ISA now is a good time to find information about what savings products are out there. For Muslims, there are some halal savings accounts that do not pay interest.

These halal savings accounts offer the same banking services as conventional savings accounts without interest.

Set Savings Goals

Set savings goals for yourself. This could be as little as saving £10 a month, to saving much more.

If you are saving to buy your first home, then you will likely be impacted by the increase in interest rates.

Look for banks and lenders that offer halal mortgages based on Islamic finance principles. Halal mortgages tend not to be as dependent on standard interest rate fluctuations and offer more stable repayment options.

Invest

Many people are scared of investing during a recession or economic crisis, but there are some good investments out there that can generate revenue and income.

Do your research and have a look at what investment opportunities are out there for you.

Investing in the right funds, stocks and bonds can be inflation busting. If you do your research you could find investments that offer a good rate of return. For Muslim investors, there is a range of halal investment options on the market which tend to be more stable than the conventional stocks and shares.

If you want to minimise the risk when it comes to investing, then try not to be too exposed to a limited number of sectors or assets. Diversifying your portfolio via investment is a good way to spread your money with less risk.

Think About Side Hustles

Side hustles have become popular in recent years when it comes to generating additional monthly income. Some low cost side hustles that have been successful in recent years include the following:

• Amazon selling
• Etsy selling
• Selling digital art and services
• Creating a website
• Freelance graphic designing
• Freelance writing
• Blogging and vlogging
• Social media influencing
• Shopify
• Dropshipping
• Creating online courses and offering advice
• Affiliate marketing and advertising services
• Starting a podcast
• Using comparison and cash back websites

These are just some side hustles that require very little financial outlay at the start.

Undertake Due Diligence Before Making Big Financial Purchases And Decisions

If you are thinking of making a big purchase such as a home or a car then make sure you do all the necessary research. Use comparison websites to find the best prices for things like electrical goods and holidays.

When it comes to home purchases, remember the housing market is likely to undergo some change in the coming months.

It might be better to sit tight to see if there is a fall in house prices. You should also look at different funding options such as halal mortgages. These types of mortgages tend not to have fluctuating rates as they are not interest based loans.

Take Your Time - Don'T Be Hasty

This is important. Now is not the time to make rash decisions or rush into big purchases or commit to long-standing and expensive monthly subscriptions.

Whether it is a smartphone or a new streaming service, take your time in deciding whether you definitely want to commit some of your monthly income to it.

WHAT IF YOU ARE SELF-EMPLOYED?

For the self-employed there are some additional concerns during a recession. For a start, whilst you may already be accustomed to fluctuating monthly income, you may see a drop in overall income as your customers feel the pinch and cut back on their spending.

Rising inflation is likely to affect all businesses, irrespective of size and industry.

Now is a good time to look at your personal finances, and check to see that you can:

• meet your mortgage repayments or rental payments
• meet all your essential direct debit payments for things like utilities
• have enough money to cover food and groceries for at least 3 months
• have some savings to fall back on in case your monthly income drops
• cut back on any non-essential items of expenditure

Some Ways You Can Protect Your Money

The Bank of England recently raised the interest rates. When this happens, it is usually an indication that the Bank of England wants people to start saving more and spending less.

Some ways to future-proof your money and savings include the following:

• Pay off as much of your existing debt as you can
• Make changes to your living standards that would bring your costs down
• Check to see if you can consolidate any of your debts
• If you have investments, check up on them and see how they are performing
• Save for a rainy day - even a few pounds a month will soon add up
• Track your spending by separating your wants from your needs
• Limit spending on gifts
• See if you can fix your mortgage if you are currently on a variable rate, there are some deals to be had out there

Introduction

Cryptocurrency is essentially a digital currency exchange and digital payments platform that uses blockchain technology. The technological and digital revolution over the last few decades has meant that innovative payment systems have been created and utilised, and cryptocurrency is one of the major breakthrough payment systems for business and personal finance use. Whether or not cryptocurrency is halal or haram is a debate that is ongoing between Islamic scholars.

This article will examine cryptocurrency, Islamic interpretations, and the types of cryptocurrencies available.

Cryptocurrency

Although there are over 2,000 cryptocurrencies on the market now, Bitcoin is probably still the most known form of cryptocurrency in the blockchain market, and was the first cryptocurrency coin to go mainstream but there are other cryptocurrencies entering the market.

For Muslims across the Islamic world, the question arises as to whether crypto payment platforms are deemed to be halal or haram in the eyes of Allah and in accordance with Shariah principles, and whether as a currency it prevents money laundering. Whether or not cryptocurrency is halal or haram depends on the how a specific cryptocurrency aligns with the principles of Islam.

Cryptocurrency - Characteristics

One of the defining aspects of cryptocurrency is that there is no central authority such as a Government that authorises it or records it. Cryptocurrencies operate on decentralised networks using blockchain technology.

Most cryptocurrencies have a limited supply, or at least a capped supply. Transactions are transparent and traceable, but there is also a degree of anonymity of parties. One the main advantages of cryptocurrency is that it offers global accessibility. It can be received anywhere in the world - all you need is an internet connection.

For Muslims, cryptocurrency does tick a lot of the Islamic finances boxes when it comes to transparency and traceability. However, ultimately it is the duty of every Muslim to be seeking knowledge, and this guide will address the use of the cryptocurrency market and its intrinsic value.

This article will consider whether crypto currency is permissible as a form of actual money under Islamic laws and in the Islamic world. We will consider the views of Islamic jurists and scholars on this emergence of what is considered to be new money addressing the question of is cryptocurrency halal.ISLAMIC SCHOLARS INTERPRETATION - IS CRYPTOCURRENCY HALAL?

A comprehensive Islamic law interpretation, one that sparked a massive rise in Muslim investment in Bitcoin and Ethereum in 2018, was provided by Sharia advisor Mufti Muhammad Abu-Bakar (former advisor to Blossom Finance) who looked at the question of is cryptocurrency halal as a money supply. He argued that Bitcoin is permissible under Islamic principles.

Mufti Abu-Bakar considered arguments that crypto itself was speculative when it comes to personal finance, but his view was that all currencies have a speculative element and this did not automatically deem cryptocurrency as haram.

Crypto Currencies

Islamically, if a business does not have an element of appropriate loss probability within its assets is not strictly trading in a Sharia compliant manner. The Grand Mufti of Egypt, Shaykh Shawki Allam believes that cryptocurrency is haram and he is joined by other Shariah scholars from the Middle East and beyond including Shaykh Haitham Al Haddad who see crypto as high risk. Their argument is based on the notion that crypto itself does not hold enough credibility as a currency to be deemed to be halal.

However, many other Sharia scholars believe that crypto itself does confirm to Sharia money rules and Muslims are permitted to invest in crypto.

Islamic scholars who believe that cryptocurrency money and digital assets are halal include Ziyaad Mahomed, Shariah Committee Chairman of HSBC Amanah Malaysia Bhd, and Mufti Faraz Adam. These views lend credence to the notion that Muslims can invest in crypto.

Arguments in favour of crypto being deemed halal include:

• There is often a lack of riba (interest). Crypto operates on decentralised platforms without any central authority. This usually means there is no interest charged or payable.
• Crypto is used as a medium of exchange with a legitimate purpose in financial and economic transactions.
• Technologically, crypto is neutral. Scholars argue that it is the use of the crypto that determines if it is Sharia compliant or not.
• The fact that crypto is generally thought to be scarce means that it is easier to avoid speculation and uncertainty and this aligns with Islamic finance rules.

Islamic Scholars

As mentioned above, one of the main reasons Islamic jurists and scholars from Muslim countries argue that cryptocurrency is halal, is that the concept of the blockchain and other cryptocurrencies are inherently anti-interest when looked at from a money generation source or perspective. Crypto operates outside of conventional banking systems and interest-based transactions.

Islamic banking laws are also anti-interest so the technology, pricing, and buying and selling of cryptocurrency money is deemed halal by many Islamic scholars who rely on the teachings of Prophet Muhammad PBUH when seeking guidance about permissibility (ultimately, only Allah knows best).

Given that crypto has a finite supply, it is less likely to be subject to inflation. This means it can maintain a fairly stable value - again an important element of Islamic finance.

Crypto Blockchains And Islamic Finance Principles

Blockchains refer to the blocks of technology used to record digital cryptocurrency transactions. Blockchains act as a system of record and the reason this form of technology is so important is that it is virtually impossible to hack, change or cheat the blockchain platform or marketplace.

With the use of blockchain, centralized financial institutions and establishments are not needed as no central control is required. This also means that crypto trading (and the stock market) is more transparent.

According to many Islamic scholars and religious leaders, this addresses the question of is crypto halal within Islamic Finance rules and Islamic law more generally.

As cryptocurrency money is deemed permissible and halal under Islamic Sharia rules this has unlocked the crypto investment market to a global Muslim community with increasing numbers of Muslims with an interest in buying crypto and use it as a form of currency.

In terms of business practices, there are some basic principles (discussed in this article) relating to crypto and cryptocurrency trading that help many Muslims to decide if their entrepreneurial journeys and endeavours are permissible or strictly prohibited.

Consideration And Commercial Value - Is Crypto Halal Or Haram

From the perspective of Islamic contract rules, there must be an element of consideration when answering the question is crypto halal - there must be Mal. Mal refers to possession and effective storage, and cryptocurrencies meet the criteria required as they can be possessed and stored and have commercial value (Mutaqawwam).

Crypto is a real and viable digital asset, its worth and value lies in what is paid for it, and it is capable of being owned and traded commercially so the Shariah requirements are satisfied and the the question of is crypto halal can be answered.

Shacklewell Lane Mosque

The Shacklewell Lane Mosque in East London became one of the first mosques in the UK to accept cryptocurrency donations and Zakat contributions in 2018 during Ramadan. This mosque deemed cryptocurrency halal and permissible and generated a lot of interest on the topic of the permissibility of crypto more generally under Islamic law.

Digital Currencies, Money Laundering And Shariah Law

Islamic finance principles dictates that in order for income, or investing in any product or asset, to be deemed halal it has to meet certain criteria. The principles of Shariah law should be applied to the financial systems we operate in and there has been some discussion amongst Muslim scholars about whether rules devised centuries ago can still be applied to a technologically modern digital financial marketplace.

Whether cryptocurrency is halal or haram centres on the rules of Sharia law.

Is cryptocurrency halal? For many Islamic scholars, the answer quite simply is yes. Shariah principles can be applied to modern crypto analysis and digital currencies as they are based on social justice, accountability and ethics which transcend all forms of financial transactions. As long as there is no illegal activity, then trading or investing in crypto should not be deemed to be contrary to Shariah principles.

Investments, Islamic Banking Law And Illegal Activities

There has been some discussion amongst Muslim scholars around the use of cryptocurrencies for illegal activities such as gambling, drugs, and money laundering. Critics of Bitcoin also argue that it is not legal tender as it is not backed by any central government that assigns its value and maintains regulatory standards, and it is therefore deemed to be speculated trading.

However, Islamically the use of an item that is deemed halal for an unlawful purpose does not make the original item halal. Whether it is halal or haram depends on the multiple factors.

Currency Ownership

Ownership of the currency remains with the owner according to Muslim scholars, and the coins/tokens are kept in an e-wallet. This means that investors can take part in trading as and when they want, retaining control of their assets.

As mentioned above, the publication of the working paper conducted by Mufti Muhammad Abu Bakr clearly identified that cryptocurrency is permissible under Shariah rules.

For Muslims worldwide this could have huge implications for the payment of Zakat monies that are made to the poor and to charities globally. If Muslims make up 25% of the world's population and hold approximately £1.04 billion in bitcoins, this means that £26 million is due in Zakat contributions. [1]

Medium Of Exchange

Cryptocurrency operates as a medium of exchange across the globe. This means that it can operate in legally diverse and unpredictable environments, often making it more accessible than mainstream finance options. It is a valid form of currency that holds purchasing power.

Although vulnerable to market changes, crypto coins such as Bitcoin and Ethereum are deemed to be a legitimate medium of exchange, available for use in transactions and trading. Although crypto has not yet reached the status of being a globally accepted medium of exchange, it is fair to say that it is on the way to becoming so. Commentators expect crypto to appreciate over the course of time and to store value.

Cryptocurrency Guidelines

The development of Shariah compliant cryptocurrency guidelines provides Muslims with the opportunity for ethical investments. From a financial perspective, Islamic charities could benefit hugely from Zakat and other donations as a result of crypto investment.

Many banks and financial establishments globally are recognising crypto as a financially viable medium of exchange, and this makes it easier for investors to continue to trade, buy and sell cryptocurrency.

With billions of Muslims worldwide, and the growth of crypto, it seems clear that what is perhaps needed is some form of shariah compliant cryptocurrency guidelines for Muslims to follow. This would enable Muslims to assess themselves the validity of cryptocurrency when assessed against Islamic finance rules.

Contracts

In terms of whether contracts relating to crypto are Shariah compliant, given that the contractual relationships in crypto are based on smart contracts using blockchain technology, this means that the process can be made increasingly secure and automated.

This not only reduces administrative complexities, confusion and errors, but also ensures that banks are more likely to accept the contractual relationships created.

In demonstrating Shariah compliance, cryptocurrency is earning legitimacy across the Islamic finance world. Cryptocurrency agencies are springing up across the Muslim world such as One Gram in Dubai, and Hello Gold in Malaysia.

This adds further legitimacy to the rulings that cryptocurrency is halal and can be utilised by Muslims and Islamic financial institutions. Of course, there needs to be ongoing discussion to consider is crypto halal as it operated within a dynamic and changing industry.

As the crypto market continues to evolve more questions will need to be asked, and each crypto coin should be analysed against Islamic finance principles to check for permissibility. However, as things stand right now, crypto is recognised as an asset under Sharia law and this lends it legitimacy. The things to be careful of are making sure that any cryptocurrency you are involved in does not link to any haram things and industries or activities or any form of money laundering.

Whilst there is no central body who can make a final ruling on whether crypto is halal or haram, but as there is no element of interest (riba) and no exorbitant fees relating to crypto the interest from Muslims is growing. Crypto can be used within Islamic finance principles to make ethical investments and wealth management in a Shariah compliant way. This could unlock the cryptocurrency investment market to billions of Muslims worldwide who are looking to enter the crypto market as investors.

As the currency is still in its infancy it is important to keep an eye on all new developments and to assess and analyse changes in the marketSource:
[1] https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-halal-london-mosque-donations...