Can Muslims invest in gold

If you're a business owner unsure about what's your best option for an unsecured business loan, you're not alone in being uncertain. On the face of it, there's an overwhelming choice of business loan providers, along with many different types of loan. How do you know what's right for you?The last thing you want is to sign up to a finance agreement only to discover:

• It costs you more than you expected.
• It's not as flexible as you hoped.
• You can't repay early without paying penalties.

To avoid problems like these, it pays to plan ahead and to assess your options carefully.Here are some alternative forms of business finance, not all of which are unsecured loans.

The traditional business loan from your bank

Years ago bank managers were open to taking a risk on lending money to business owners. But as layers of regulation have been added over the last few years, the historic banks have become more cautious about who they will support by providing finance. Even opening a business bank account is much more difficult than it used to be.

While regulation provides important protections to both finance providers and borrowers, the historic banks often add to this bureaucracy with their own internal processes and requirements. While these loans are usually unsecured, the bank wants some form of personal guarantee from the directors.

That said, every year businesses raise working capital by borrowing millions of pounds from the long-established banks, usually through fixed-term loans.

Borrowing from your friends and family

For many business owners, particularly those launching a new business, friends and family are the initial source of finance. This has its advantages, including:

• Often at a lower cost than a commercial rate of interest.
• Repayment options can be more flexible.
• Any interest or fees are kept inside your friends and family community.

While this approach offers a host of benefits, there are also potential risks to this informal approach to business finance. The lender could suddenly need some or all of their money back to cover an unanticipated need, or the business may not be able to meet the agreed repayments.

Personal relationships between friends and family can be put under pressure through these arrangements, if they are not managed well or if the business fails to perform as expected.

Asset finance

You could fund the purchase of a specific business asset - such as a building or a vehicle - using asset finance. This is a loan that's linked specifically to that asset and is usually secured against it. Should you fail to make the agreed repayments, the lender has legal rights to recover some of their money by taking control of the asset.

Secured loans, such as these, often take a little longer to set up because the process needs to include valuation of the asset and preparation of additional documentation. Your business can also use asset finance to release capital from an asset it already owns. Many finance providers are willing to advance cash against the value of an asset, even when it's been in use for a while.

The funding is repaid from future income that asset helps the business to generate.

Invoice finance or merchant cash advances

Both invoice finance and merchant cash advances are methods of boosting your working capital based on the value of your sales. Rather than receiving a lump sum of cash, as you do with a loan or similar form of finance, you get a rolling injection of smaller amounts of cash, in line with your sales. As turnover grows, the value of these injections can grow.

Invoice finance is suitable for businesses that sell on credit. When you raise an invoice that's due in, say, 30 days, the invoice finance provider pays you a high percentage of the value of the invoice. You benefit by effectively being paid a few weeks in advance - which improves your cashflow.

A merchant cash advance is more appropriate where you sell a considerable amount through credit and debit cards. You can get an advance based on the level of card sales you've enjoyed in the past.

Both these forms of finance help to improve your cashflow, but they're not designed to raise the large amount of capital you may need to invest in a new business growth project.

Investment finance

Whether it's through an angel investor, or venture capitalists, or some other arrangement, investment finance is where someone puts money into your business in return for a share of ownership. This means it's not a business loan, but typically a longer-term commitment with the intention of helping you to grow the business.

The finance may come with additional support, such as business advice and mentoring from someone with greater experience.

The investor typically expects to get their money back, and more, when the business has grown in value and their share is worth more. This may occur when you sell the business, which allows all the investors to capitalise on the money they put in.

The benefit of investment finance is that there are often no regular repayments to budget for, and the cash could come with additional support. The downsides include the dilution of ownership, and the possibility that the investor wants some element of control over how the business is operated.

Crowdfunding

The digital revolution has made it much easier for businesses to raise finance from the wider community, through crowdfunding hubs. These hubs allow people to invest often a relatively small amount of capital into a project. These amounts are aggregated together, giving the business a sizeable fund it can invest in growth.

Crowdfunding comes in various forms. It's popular with startups, particularly those who can establish a connection with a community of people interested in seeing particular ideas turned into viable products, such as video games or new technologies. Peer-to-peer funding networks also work on crowdfunding principles, but are generally more structured and offer more protection to those putting their money in.

Unsecured business finance from Qardus

If you're a business owner, if that business is profitable and if you're serious about growing it, we want to hear from you.

We've supported a wide range of businesses through our unsecured finance product. It's a community-based alternative to an unsecured business loan, and it's rooted in an ethical approach to commercial finance.

If you're considering taking out a business loan and you're open to exploring something that gives you all the same benefits and flexibility, and is also competitively priced, please get in touch with us today.

With the financial landscape changing constantly, Muslims are looking out for investments that are profitable and Sharia compliant. With so many Muslim women managing their own finances and the finances of their home, there is an increased demand for halal investments.

Making spiritually aligned investments seems more important than ever in todays society.Whether it is investing in the stock market, the exchange-traded fund, personal savings, having an ISA or looking to invest in real estate, more and more Muslim women are looking for smarter ways to invest.

So, what are the things you need to look out for when considering halal investment? Let's take a look.

Understanding Halal Investments

Halal investments are those financial activities that are compliant with Islamic finance rules and Sharia law. Islamically, financial dealings which are based on interest or speculation are not permitted. This means many Muslims will not invest.

Islamic finance investments are more focused on investments that are ethical and deemed to be socially responsible. That is, they offer some tangible benefit to society and are not exploitative or speculative.

For an investor looking for a halal investment, they need to look out for the following:

• the investment must avoid any form of interest: charging or paying interest is haram in Islam. This means that if you are investing in an industry that includes interest or is deemed to be a haram industry then this is not permitted.
• the investment should avoid any kind of ambiguity: this means that any form of investment in stocks and shares that is akin to gambling is not allowed. There must be clear terms and conditions and transparency in all transactions that relate to any asset or money.
• It is important to avoid haram: this relates to any industry or dealing that is haram.
• social responsibility: it is important to ensure that any investment aligns with your ethical responsibilities under Islam and is socially responsible. To invest in arms production would not be deemed to be halal, nor would investment in the alcohol industry.

Navigating Financial Products That Are Halal

Halal investment can take many different forms. They include the following:

• Islamic banking: banks and other financial institutions often offer services and products that are halal. You can use a Sharia compliant bank account to save your money.
• Islamic mutual funds: these kinds of funds have been vetted to ensure they are Sharia compliant (although you should also make your own enquiries). Islamic mutual funds invest in Sharia compliant industries, markets, and assets. Investors share in the profits generated and also in the losses if they occur.
• Islamic real estate: investments in real estate are becoming more common with the onset of Islamic finance mortgages and funding options.
• Islamic bonds (sukuk): Islamic bonds are the type of financial instruments that are fully compliant with Sharia law. They offer investors ownership in an asset and the profits and revenue are generated by the asset.
• Halal stocks: companies that operate in a halal way offer stocks that can be purchased by investors.
• Exchange-traded funds: you can find halal ETFs on the market if you look carefully. There are many ETF products that invest in a range of halal stocks and other permissible assets.
• Islamic crowdfunding: some platforms are now offering Islamic crowdfunding options and peer lending options from one person to another. If thinking of making an investment on such platforms make sure that they are Sharia compliant.

Empowering Women

There are growing numbers of young professional women who want to invest and manage their money in a Sharia compliant way. For these women investing in halal companies and stocks is not simply about wealth management but also about adherence to the rules of Islam.

The empowerment of women in the financial sector has always been a practice in Islamic societies. The very fact that women often manage the household finances and then have to ensure they have sufficient funds for the charitable payments of zakat, means that women have always been financially literate.

In Islam, mutual consent in financial dealings is one of the central concepts of Islamic finance. This has meant that women have been involved in decisions about payments and finances from the start.

Women And Business In Islam

Historically, Islam has always promoted the independence of women whether that is in the fields of education, trade, and finances. Historical accounts document that Muslim women were engaged in trade and business many centuries ago. For example, the wife of Prophet Muhammad (PBUH) was a very successful businesswoman.

Islam has always had legal protections in place for women to protect and grow their finances. These protections have secured Muslim women's rights in marriage, in inheritance, and in succession.

Halal investing is linked to faith and encourages Muslim women to view their wealth as a blessing from God and one that needs to be shared and stored ethically. In Islam, women and business are not mutually exclusive. In fact, Islamic history teaches us that women have always been active participants in the business world.

Islamically, women are entitled to own, invest and manage their own funds.

Explaining Interest-Free Finance

For anyone looking to manage their finances in a Sharia compliant way, the very first step is to ensure you are not charging or paying any form of interest.

Interest free finance operates without including interest in financial transactions. When it comes to investing, it is important that you stay away from interest and any industry that relies heavily on interest or debt based finance.

Interest is seen as very exploitative and unethical.

Interest free finance operates on the basis that both parties to the transaction share the profit and the risk. The focus is on real economic activity that generates profit, rather than using money to create money via interest.

Educating yourselves on the core concepts of Islamic finance will ensure that any investment activity you take part in will be Sharia compliant.

Define Goals And Objectives

Identify what your financial goals and objectives are. Look for a market that appeals to you and aligns with your personal values. This should also apply to other forms of investment such as your pension. Is your pension being invested in companies that align with your ethical position? Always do your due diligence and research the industries your finances are involved with.

Spread your investments. Diversify your portfolio as this will not only reduce your risk but enable you to do more social good with your money. It is not necessarily always the case that investing in one kind of stock or bond will yield the best results.

Look at halal index funds and examine the market of each fund. How do they operate? Where do they operate? what information do you have about the return you will receive? Is the service being offered Sharia compliant? what practices does the industry use? How do they pay?

If any industry is non-compliant with Sharia rules then stay away from it.

The value of your investment should not be based on speculative activities or interest. This applies to any form of investment and savings accounts.

Choosing The Right Provider For Halal Financial Services

It is essential that you consult with Islamic finance experts and scholars if you are unsure of investing. An educated Islamic finance expert will ensure that your investment choice is Sharia compliant and regulated properly in the UK.

Once you have made the investment you must undertake periodic evaluations. Regularly reviewing your investment portfolio will ensure it continues to align with your ethical and financial goals. Don't assume that an investment will remain Sharia compliant throughout its lifetime. Companies change course depending on the economy so keep an eye on the Sharia compliancy.

Aligning Values With Ethics And Wealth

When it comes to aligning values with ethics and wealth, Muslim women are embracing the principles of Islamic finance and Sharia compliant investment. Whilst Islam is centred around the the 5 pillars (declaration of faith, prayer, charity, fasting, and hajj pilgrimage), Muslims are also expected to follow the Sharia.

Pursuing halal investment and savings not only ensures that you live a Sharia compliant lifestyle, but also ensures that you live a more meaningful and ethical life.

It is essential to educate yourself and gain an understanding of Islamic finance principles. Stay informed about the different financial instruments that are available and assess them for compliance with Islamic principles. Screen investments and work with companies who also align themselves with Islamic finance rules.

The world of Islamic finance based investments is widening year on year, so there are plenty of options available out there. Regularly review your investment portfolio and make any adjustments you need to. Finally, be patient and be ethical.

Qardus do not provide financial or investment advice.

IS THERE A HALAL INDEX FUND?

Yes, there are many options these days for those looking for halal index funds.

Index funds have long been known as one of the best and easiest ways to invest your money. The increase in the availability of halal index funds, that is funds that comply with Islamic Sharia rules, means that there is an even greater opportunity to maximise your investments without breaching Islamic finance principles.

Halal index funds enable investors to invest in a wider selection of stocks all within one fund.

WHAT ARE INDEX FUNDS?

An index fund is essentially a fund that follows what is known as a benchmark index, for example, Nasdaq 100, FTSE 100, and the S&P 500. Index funds are a portfolio of stocks and bonds.

Index funds are generally regarded as a passive form of investing. What this means is that investors who invest in index funds do not have to actively manage their investments.

The index fund will aim to mirror the index they track, they do not need to be actively and constantly managed.

Exchanged traded funds (ETFs) are those funds that are traded on exchanges and usually ETFs will track a specific index. EFTs offer investors a basket or bundle of assets that can be traded. The result is that the portfolio is diversified and the risk is deemed to be low, especially in times of economic growth.

Index funds are popular with all kinds of investors from angel investors, stock investors, new investors, and those looking for responsible investment options.

Difference Between Mutual Funds And Index Funds

The main difference between mutual funds and index funds is that mutual funds need a great deal more active management by fund managers. These fund managers actively choose the investments and manage the mutual fund and this leads to increased management fees and costs.

Before making any kind of investment in index funds you should make some inquiries about the fund, read online information from the relevant website and try and look into the methodology the fund uses (this includes yield, capitalisation, and price).

HOW DO INDEX FUNDS WORK?

Index funds work by investors investing their money in to an index fund that has been created. The money is then used to invest into the companies that comprise the particular index fund chosen. This means investors are able to diversify their portfolios and invest in companies they want to.

For example, if an investor invests money in the S&P 500. This index fund essentially tracks the performance of 500 of the largest companies in the USA. The S&P 500 is one of the largest and most popular index funds on the market.

Investing in companies via index funds means that investors' money is linked to, and tied up with, the performance of the companies within the fund. Many of these index funds have a very wide range of companies within the fund.

INDEX FUNDS WHAT ARE THE RISKS?

As many of the most popular index funds are diverse, this means they are less risky for investors. The reason the risk is lowered with index funds is that there are usually many companies within the fund, so all the investment is not tied up with the performance of one company.

Index funds are known for offering what is considered to be a broad market exposure for investors, with very low operating costs and risk. Index funds are popular with people who want to use the fund as a pension and plan for retirement.

Index funds are normally managed by a fund manager whose employment is based on ensuring that the fund is managed and tracked properly.

Sharia Principles Relating To Index Funds

The Sharia rules that relate to investment funds are the same rules that apply across all financial transactions.The main principles of Islamic finance that should always be considered when looking for halal index funds to invest in include the following:

• There should be no element of interest (riba)
• The investments should be ethical and should enhance communities and society in keeping with the social justice element of Islamic finance
• There should be no element of speculation or gambling (maisir)
• Both parties in the transaction should share the risks and profits
• There should be no transactions involving uncertainty (gharar)
• There must be asset backing - this means that every financial investment and transaction must relate to a tangible asset
• The industries, business, and companies within the fund should not be deemed to be impermissible in Islam

WHAT INDEX FUND IS HALAL?

The aim of halal index funds is to create long term appreciation of the investment funds via a diversified portfolio. Revenue is generated if the portfolio increases in value.

This portfolio is securities and investments are compliant with Islamic finance investment principles as laid down by Sharia laws.

Two of the largest index funds are the HSBC Islamic Global Equity Index Fund (halal) and the Vanguard FTSE 100 Index Fund. In the United States, the Dow Jones Industrial Average is one of the most popular funds to invest in. However, there are other index funds that meet the Sharia principles of halal investment. The numbers in the name often refer to the number of companies included within the index. For example, the FTSE 100 includes the largest 250 companies that are currently listed on the London Stock Exchange.

Before investing, always make sure you have done your due diligence and that the index fund you are investing in has been certified as compliant with Sharia rules.

For Muslims, the main incentive for investing in halal index funds is that they comply with Islamic finance rules and regulations. Any stock or bond within a halal index fund needs to be compliant with Sharia rules relating to investing.

ADVANTAGES OF INVESTING IN HALAL INDEX FUNDS - IS INVESTING IN A FUND HALAL?

One of the main advantages for any individual investing in a halal index fund or product is knowing that you will be investing your money in funds that comply with Sharia principles. Halal index funds also take care to ensure that the money is not invested in industries prohibited by Islamic finance principles (such as the gambling, alcohol, and porn industries).

For investors who want to invest in an ethical way that does not adversely impact society, then halal index funds offer the opportunity to do that. The relevance of halal index funds has grown significantly in recent years with the increase in demand for Sharia compliant and ethical investment options.

There is a great deal of global movement towards more responsible investing and halal index funds meet the criteria for ethical investing.

In the United Kingdom, index funds are regulated by the Financial Conduct Authority.

Considerations For Investors Wanting To Invest In Halal Index Funds

Investment in any kind of fund comes with its own risks. You should always seek to do as much research as possible before you invest.

Some of the key risks relating to halal index funds include:

• Risk of the investment value going down
• Exchange rate risks - if the economy and the markets are volatile then the exchange rates could fluctuate and affect your investment gains
• Tracking risks - whilst index funds will track the index, you should expect to see occasional differences in the gains
• Operational risks - as with any fund, halal index funds could be subject to operational and compliance risks which could affect any profit or return generated

LOOKING FOR THE RIGHT HALAL INDEX FUND - IS THE S&P FUND HALAL?

In addition to the points raised above, if you want to invest in a halal index fund then you should look specifically for:

• Confirmation/documentation that the index fund has been certified as being compliant with Sharia rules
• The scope for diversification - the greater the diversification the lower your overall risk
• Fund fees - check what fees your investment will incur
• Foreign companies - looking at companies abroad is a great way of diversifying your portfolio and finding halal investment funds
• Minimum investment levels - check to see if there is a minimum investment level required for the fund you are interested in. Many halal index funds are accessible and have reasonable charges for every level of investor
• Information - check what information is available on the index funds you are interested in. If you have any questions find an expert who can help you with your queries

As halal index funds grow in popularity across the globe it is important to find the fund that works best for you. Currently, Apple is deemed to be one of the largest holdings in the S&P Shariah Index.

SAVING VERSUS INVESTING IN INDEX FUNDS?

Whilst is it always a good idea to have savings, if you are comfortable with taking small risks and want to diversify your investment portfolio, then halal index funds are the way forward.

If you are risk averse and do not want to deal with any market fluctuations, then it is probably best for you to maximise your savings. However, in the current economy savings are not the best way to use your money. Also, for Muslims who are not permitted to make use of high interest savings accounts, looking into index funds is a good way of earning revenue from the money they have.

Halal index funds are a great way for beginners to invest in the stock market. Index funds enable investors to own a share in a company for relatively low cost.

The company that manages the fund will do all the running around and hard work so you do not have to.