Halal investments a guide for Muslim women

Halal investment opportunities are those financial products and services that comply with Sharia rules about transactions. Investment is permitted in Islam, but the way you invest is important. Halal investments can span different products including stocks, real estate, commodities and business-to-business investment.

Types Of Halal Investments

There are many different types of halal investments available on the market today. Previously people may have questioned whether specific investment vehicles such as bonds, stocks, cryptocurrencies, and real estate are permissible Islamically.

However, there are now many Islamic and halal alternatives to these investment options that are Sharia compliant and screened for compliancy with Islamic rules about finance.

Let's have a look at some of the most common halal investment vehicles:

• Property/ real estate: property has always been a good investment opportunity but often these opportunities come with interest based products. Investing in real estate using Islamic finance vehicles (interest free) is a great way to grow a portfolio and build tangible assets with potential rental value.
• Islamic bonds (sukuk): sukuks are essentially financial certificates that represent ownership. The returns on sukuks are based on performance rather than interest, and often a fixed return is available.
• Islamic mutual funds: as the name suggests these kinds of funds are halal. The way they operate is that multiple investors pool funds into a diverse portfolio of halal stocks, bonds, and assets.
• Venture capital and private equity: investing in Sharia compliant companies can grow wealth in a halal way.
• Precious metals (gold, silver): you can hedge against inflation and unpredictable market conditions and fluctuations by investing in precious metals that hold their value.
• Halal crypto: As the Islamic finance market has grown, so too has the availability of halal bitcoin and crypto.

ARE INDEX FUNDS HALAL?

Whether an index fund is halal or not depends on how it was formed and how it operates. There are halal index funds available to those who want them. Any index fund that is Sharia compliant should have the following components:

• avoiding haram industries (gambling, pork, interest)
• be Sharia screened by experts in Islamic finance
• avoid debt leverage and riba
• have thresholds relating to revenue and debt

ARE ISAs HALAL?

ISAs (individual savings accounts) are a very popular saving account in the UK. They enable people to save money without paying tax on the interest or gains. You can specifically look for halal ISAs and if you do then look out for the following:

• If you are looking for a stocks and shares ISA make sure the stocks and shares are not linked to haram industries.
• Ensure there is no riba attached to the ISA - cash ISAs tend to be interest based which is not permissible in Islam.
• Search for halal funds that are available.

HOW CAN I GROW WEALTH AND INVEST WITHOUT ENGAGING IN INTEREST?

This is a common question many Muslims ask themselves. The answer to this question is simple - it is possible to grow wealth and invest without breaching Islamic rules.

The very first step is to seek our Islamic finance organisations, banks, lending institutions, services and products.

Make use of halal investment products already on the market. If you have non halal investments currently, these can be transferred to halal investment options with the right guidance and support.

There are many alternative finance and investment vehicles including peer to peer lending and crowdfunding. In addition, Islamic banks are now offering interest free services.

The most important thing would be to educate yourself on Islamic finance and what halal investment entails.

Avoiding Interest

One of the best places to start when wanting to grow and develop your halal investments is to avoid interest. Interest is strictly prohibited, and Muslims should do everything they can to avoid any financial vehicle that includes interest.

If you can actively avoid interest then you are on your way to long-term financial compliance with Islamic finance. This not only aligns with the teachings of the Quran but enables Muslims to fulfil their Islamic duty to remain Sharia-compliant.

Some people worry that avoiding interest will limit the growth of their investments but this is not the case. You can grow your portfolio of investments AND remain compliant with Islamic rules. In fact, there is evidence available that demonstrates that the growth potential of Islamic finance products matches that of more conventional investment models and is actually more sustainable.

Invest Ethically

Halal investments are centred on the notion of investing ethically. In fact, faith based investments not only lead to material growth but also spiritual growth. Ethical investment aligns itself with Islamic principles.

Ethical investments are not only Sharia compliant, but they also avoid harmful industries and practices. This not only supports ethical businesses but leads to greater social responsibility. The ethical investment market is growing fast as the demand for ethical investment opportunities continues to grow across the world.

Islamic banks in the UK and abroad offer ethical investment opportunities. When determining if a bank or products is Sharia compliant it is always important to ask the experts and scholars. In the UK the Islamic finance market is regulated, but you should always ask your own questions if you have any doubts.

Halal Investment Strategies

For those looking for halal investment strategies, the best place to start is always with a reputable Islamic finance organisation. Once you have found the bank or platform to use the following strategies will help you:

• Screening - make sure you screen products and services to ensure they are Sharia-compliant.
• Filtering - if you have any doubts about compliancy then remove these investments from your portfolio.
• Ongoing assessment - keep reviewing and assessing your investments for Sharia-compliancy.
• Diversify - keep your portfolio diversified and apply your capital to different sectors.
• Long-term planning - focus on the long-term and don't expect quick short-term gains.
• Focus on profit and loss sharing arrangements to spread the risk.
• Remain engaged - stay actively engaged with your investments.
• Education - awareness is key.
• Ethical evaluations - make sure you check the ethical valuation of your investments.
• Reinvestment - use returns well!

Debts And Leverage

When it comes to debt, Islam focuses on ensuring that debt is riba free. What this means is that no interest is charged in debt and no interest is paid. In the context of conventional mortgages and loans this can create issues for Muslims as many mortgages in conventional markets are based on interest.

However, there are an increasing number of halal mortgages available on the market. These halal mortgages help Muslims get onto the property ladder without breaching Sharia rules.

Halal mortgages operate without any form of interest. Usually a bank will buy the property outright and sell it back to the purchaser at a marked up price. The purchaser will then pay the price over a series of instalments.

Another version of the halal mortgage is where the bank will lease the property back to the buyer for a specified time until the buyer buys out the bank.

Halal Investment Opportunities

The important thing to note with halal investments is that no investment activity can involve any form of interest (riba).

Any form of investment instrument that includes interest is not permissible.

The division of profit should be equitable between the parties. The profit and loss sharing elements of the investment should be based on a joint venture structure. No one party to the transaction should have an excessive benefit.

Investment activities must stay clear of haram industries such as the pornography, gambling, alcohol, and pork industries.

Investments should not be speculative or uncertain (gharar). Uncertainty in investments goes against the Islamic finance notion of fairness and transparency between the parties. This means that investment activities such as options and futures are prohibited.

Investments should operate within a real and functional economy. Look for the following when investing:

• Fair trade enterprises
• Renewable energy
• Environmental projects
• Waste reduction
• Healthcare
• Education
• Affordable housing
• Social welfare projects
• Community development

Avoid the following:

• Stocks that are based on interest/ riba
• Stocks or companies/ businesses with high levels of debt
• Any haram business or product
• Mismanagement or poor corporate governance
• Exploitation within society
• Poor distribution of wealth and profits
• Poor performance when it comes to demonstrating ethical adherence.
• Adherence to Sharia rules relating to financial transactions and investments. Invest your money now

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...

As a business owner, you're always making plans for your future. You're planning ahead on a daily, weekly and monthly basis, looking ahead to anticipate challenges and opportunities. Whether your business is in its early days or it's become established in its market, you'll always be thinking about tomorrow and what comes after.

A vital part of that planning is around finance - how you're going to pay for the people, the stock and the infrastructure you need not just to keep going, but also to grow the business. You want to avoid running out of working capital - cash - because that's the lifeblood of commerce. It's cashflow that makes or breaks a business.

For many, finance planning isn't the most exciting part of running your own business. But it is perhaps the most important task, and certainly one of the most rewarding when you get it right. Investing time in finance planning can literally pay dividends in the form of better cashflow and improved profits.

If you're undertaking any major new project in your business, such as launching a new product range or expanding your geographical market, you expect to put together a business plan. This covers all aspects of the project, including the financial element - this is your finance plan.

Here are our suggested steps for putting together that business finance plan.

Step 1 Know what you need and why

Most planning starts with having the end in mind. You have a vision for where you are going - such as opening branches in new locations, increasing turnover by a specific amount or becoming a recognised brand in a new market.

In your business plan you'll set out the steps you need to reach that destination. You'll identify your current strengths and weaknesses, also the opportunities and the threats.

The business plan will detail the actions you need to take, along with their anticipated costs. These are likely to include:

• Purchase of stock or equipment
• Marketing costs
• Employment costs

Your planning will also factor in the impact of new revenue streams, when your investment in growth begins to generate new sales. This should lead into a cashflow plan, where you document projected income and costs over time. The cashflow plan will help you to see how much funding you need and over what period of time.

Step 2 Understand your current numbers

Having planned for the future, you also need to have a strong grasp of where your business is today. Without a realistic understanding of current income and costs and the cashflow associated with these, it's hard to plan for the future.

However, you also need to be aware of other numbers in your business, such as the value and type of assets that you have and the existing levels of debt and their associated repayments.

Most businesses carry some form of debt, such as an overdraft, a loan or credit cards. Alternatively, there could be an obligation to repay an external investor, such as a business angel. While the expectation of repayment may still be some way in the future, it should be factored into your numbers and planning.

If you're looking for funding for a major new initiative that will grow or transform your business significantly, this presents an opportunity to restructure your firm's finances. You could consolidate existing small debts, or even do away with them entirely by taking on funding in a different form.

Step 3 Research your options

When you're raising funds to grow your business there are a number of routes you can take. Your choice depends on factors that include:

• Your credit rating
• Your attitude to risk
• How much control you're willing to give away

You should consider taking professional advice about raising finance for business growth, drawing on the knowledge and experience of others. Be sure to take into account the impact of taxation on your decisions. Take a look at how similar businesses are financing their projects.

It's possible that some of the assets your business owns can be used as collateral for finance, or used in another arrangement to release capital, such as a sale and lease back.

Where appropriate, involve others with a role in the management of the business, such as directors and other senior staff.

One major decision will be whether you decide to raise debt finance or equity finance. If ethical or Sharia-compliant funding matters to you, it's worth taking time to explore halal investing options before you commit to a route.

The more information you can gather at this point, the better informed your decision will be.

Step 4 Create your finance plan

As you pull together all the information you can start to make a finance plan based on your preferred funding options.

At the heart of your plan will be a cashflow forecast, which sets out the incoming and outgoing cash movements over time. This can be built in a spreadsheet or in a dedicated finance modeling app. Building the plan in a spreadsheet or app should allow you to adjust it based on different scenarios, helping you to assess the impact of various changes.

You may want to create alternative plans, based on different approaches to raising the finance - such as taking out a loan over several years versus receiving investment from a business angel.

Step 5 Review your plan in detail

Share your financial plan with others to get their feedback. Encourage them to question your assumptions and to suggest alternative options. The larger the project, the more important it is that you have a finance review by a professional, such as your accountant. An objective opinion from someone outside your business can be hugely valuable, particularly when they have experience of finance planning for similar projects.

Step 6 Source funding providers

Having thoroughly researched, built and tested your finance plan, it's time to approach potential funders. This could be a bank, a venture capitalist or a business angel, or some other provider of business funds. Your planning will have helped you identify at least one, and possibly several, funding options.

Depending on the scale and basis of the funding you're looking for, potential providers will have different questions and require specific information from you. This can include:

• Your firm's past financial performance
• How your business is managed
• Projected future cash flows

This information, along with other details about your proposed project, will be easy to supply if you've done a thorough job of your finance planning.

Funding your business project with Qardus

We work with owners who are looking to grow their small or medium-sized business. Having already proven their product and their process in the market, they're now seeking funds for major growth initiatives.

The funding we provide is from £50k to £200k with terms of between 6 and 36 months.

We're different from banks and most other UK finance providers because we don't charge interest. Our funding arrangements are rooted in Islamic community principles and are certified as Sharia-compliant. This also means we don't work in business sectors considered damaging to society, such as alcohol, tobacco or gambling.

Because of our principles, our funding solution is proving a popular choice not only with Muslim business owners, but also with others committed to ethical and community values.

Talk to us about getting access to fast and flexible growth finance.