Healthcare case study

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.

When it comes to investment strategies, ethical investing (also known as impact investing) is gaining traction. Some commentators have credited the likes of Greta Thunberg for the increase in demand for impact investment products, but this type of investing has been around for centuries in religious communities and societies.

Impact and ethical investments concentrate on approaches and strategies that facilitate inclusion and integration. As a result, the transaction has a positive impact on the social and economic environment. The investment itself is deemed to be one which benefits the investor and the wider community.

For investors looking to align their ethics and values with their financial output, they want to be sure that their portfolio grows in a sustainable way that supports their role as an ethical consumer and investor. Many mainstream funds do not offer ethical products and services, but the tide is changing fast and there are more companies offering bespoke ethical funds for discerningly ethical investors.The main benefits of ethical/ impact investing include the following:

• The values of companies and investors can be aligned
• Companies committed to social causes can be supported
• There is a feel good factor associated with ethical investments
• For religious communities, ethical investments are compliant with religious rules relating to investing (Sharia rules for Muslims)
• Ethical funds are a real catalyst for change
• The financial outlay does what it says on the label - ethical investment

Socially Responsible Investments

Socially responsible investing is a term associated closely with ethical investing. Socially responsible investment has a social conscience and does not negatively impact society. There are many companies on the market that offer investors the opportunity to invest in funds that provide positive social change and impact.

Of course, for Muslim investors socially responsible ventures have always been on the agenda, even when the opportunities to invest responsibly were not widely available on various platforms. Islamic finance dictates that Muslims should not invest in any project that could be detrimental to individuals or society as a whole. This is part of a much broader Islamic value-based social system. Muslims are instructed to safeguard society, the environment and make ethical choices that do not negatively impact society.

Ethical Investments

The definition of ethical investing is centered on the core concept that it is possible to align your financial goals with your moral and ethical values. Ethical ventures are focused on ensuring that the primary filter when selecting opportunities relating to money is based on ethical principles and considerations. There is a demand for increased transparency when it comes to shares, trusts, stocks, bonds and returns.

Used interchangeably with socially responsible and impact investing, ethical investments require due diligence before the capital is actually spent. Assessing whether a fund is ethical is based on using certain environmental, social, and governance criteria which can help you decide whether your investment is, indeed, ethical and socially responsible.

What ethical investment facilitates is the ability for individuals to allocate their capital with companies and funds that align with their own personal beliefs. One example of this is investors who want to avoid industries deemed to be unethical such as gambling, porn, weapons, and alcohol.

For Muslims, ethical ventures go further and also seek to ensure that the investments are compliant with the principles of Islamic finance and Sharia law.

Islamic Finance And Ethical Investments

Whilst ethical transactions may appear to be a relatively new concept in the West, Islamically, ethical investments have been a central principal of Islamic finance for centuries.

Historically, religion and ethical investing have been aligned. Islamic finance prohibits any financing of industries deemed to be haram.

Socially responsible investing and Islamic finance have seen rapid growth in recent decades, and it is no coincidence that the two go hand in hand. Islamic finance centres on principles of social responsibility and impact. This is achieved through principles of sustainability, positive impact, and strong governance.

More and more investors are joining Muslim investors in looking for ethical funds, and funds that offer green funds, or those that support the environment positively.

In recent years, the growth of ethical investing has been fuelled by religion AND social views. Social trends that have begun to lean towards ethics, environmental impact, and transparency have meant that ethical investments have become more mainstream.

In the 90s there was a move away from funds and ventures in the fuel and coal industries, and industries using animal testing, as these were seen as being harmful to the environment and society as a whole. Moving away from environmentally damaging industries was seen as a way of problem-solving some of the damage caused by the operations of these industries.

Sharia Compliant Investments

Investments that are Sharia compliant focus on socially responsible investing, and are focused on the main Islamic finance principles that prohibit:

1. Riba (interest)
2. Gharar (speculation)
3. Financial transactions in industries deemed to be haram such as the tobacco, alcohol and gambling industries

Environmental, Social, And Governance Considerations

In order to assess whether your portfolio is indeed socially responsible and ethical ,there are certain criteria that you can use. The criteria can broadly be divided under three main categories - environmental, social, and governance.

Investors need to review a broad variety of behaviors to understand if the investment is indeed sustainable, responsible, and socially impactful.

ENVIRONMENTAL

Environmental factors to look out when investing include assessing the impact of the investment on the following:

• Climate
• Pollution
• Waste
• Water stress
• Energy use
• Renewable energy
• Conservation
• Carbon footprint and ecological footprint
• Local economic policies

Environmental criteria will assist investors and companies to ascertain the impact of their ventures on the wider environment. Ethical companies should be aware of the environmental impact of their investments by using the criteria above to ensure that the risks are being identified, assessed, mitigated, and managed.

For example, investing in land development may seem like an ethical project, but what if the development adversely impacts local populations, natural resources, and contamination?

GOVERNANCE

In similar vein, anyone investing with a company will want to ensure that the company they use has a very transparent and accurate governance structure in place. Without strong governance, there is less accountability when it comes to ensuring that the investments you make are socially responsible.

The financial reporting and accounting methods, shareholders involvement, accountability, and financial management must have clarity and be transparent. For Muslims, they will also want to ensure that the investment company does engage in any investment behaviours deemed to be haram under Sharia law and Islamic finance rules, and ensure that haram industries are avoided.

When examining the practices of companies and businesses claiming to have ethical investment services and products, the following criteria should be carefully examined:

• The ethical and moral stance and values of the company
• The diversity within the company, shareholders, and board members
• The voting rights of shareholders and profit sharing arrangements
• Previous governance records
• Tax treatment and financial transparency
• What anti-competition practices are in place
• How the company manages financial and ethical conflicts of interest
• Asset management strategies and choices
• How the company treats its customers and investors

SOCIAL

Social criteria focuses on the business relationships of the investment company/ investment and the social impact.

Socially responsible investing focuses on social values, the environment and good governance. Does the investment company you want to invest in hold similar values to you? How committed are they to ethical values? Do they uphold Islamic finance principles? Does the company donate to charities that align with your charitable focus?

When considering the social criteria, you need to look out for investment and financial impacts on the following:

• Supply chain labour
• Ethical sourcing
• Data and privacy
• Protocols relating to health and safety
• Impact and bonds with local communities and links with them
• Previous investment history and sectors invested in
• How the investment portfolio is socially responsible

Ethical Investing

In order to ensure that the investment you make is ethical, you need to ensure that you do your research and analyze the historical, present, and predicted performance and standards of the investment you are interested in. Of course, there are many companies that offer ethical investment products, but that does not mean investors are absolved of their own personal responsibility to undertake research and ask their own questions.

Investors should:

• Review the mission statement of the investment company
• Check their track record of investments
• Review their ethical values and see if they align with your own
• Check if the company complies with laws and statutes
• Understand how ethical investments and funds operate

Is Ethical Investing Profitable

Ethical investing does not guarantee a profit. However, when it comes to the performance of ethical funds as compared to traditional investment funds, there does not appear any significant difference. In fact, ethical investments can sometimes outperform traditional investment funds.

The whole point of ethical investing is that you can invest your money in a way that yields positive results on society and also makes a profit. According to an article in the Guardian (December, 2021), in the United Kingdom alone, the annual spending on ethical services and products has exceeded £100 billion [1]. With the onset of the global pandemic and climate change, people are looking for ethical investments and industries far more than ever before.

The Future Of Investing

We have entered an era when socially responsible investing is increasingly in demand. The increase does not only relate to ethics and morals, but is also centered on principles of sustainability, investor goal-setting, values, protection of the natural environment, whilst still making money.

Gone are the days when investing in the stock market was solely for the purpose of generating income, with no thought for the impact of the investment. Modern ethical investors are keen to ensure their investments are transparent, socially responsible and with solid governance structures in place. Sustainable long term results are seen as aligning with the much broader objectives and principles within Islamic finance and the wider society.

For too long, investments have focused on profit margins over values. Ethical investing means that profits can still be prioritized, but they ranked alongside ethics and values and do not lead to the social exclusion of marginalized groups or countries.

Tips To Invest Ethically

Investing ethically is about more than making sure your investment appears to be ethical. It is focused on investors learning about what it is they are investing in, the social and environmental impact, and holding investment companies to account.

The following tips will help you avoid investments that do not align with your personal values and goals:

• Assess and identify your values and principles
• Learn about ethical investments and how they operate
• Build your investment portfolio carefully with sustainability and social responsibility in mind
• If you have ISAs or pensions review where they are invested
• Check your investment strategy - do you want to focus on start-ups or existing ethical investment companies?
• Make sure you diversify your portfolio across regions and sectors
• Planning your investment in advance

Sources Used In This Report

[1] UK annual spending on ethical products surpasses £100bn for first time [The Guardian, Dec. 2021] [https://www.theguardian.com/money/2021/dec/31/uk-annual-spending-on-ethical-products-surpasses-100bn...]

WHAT IS STUDENT FINANCE?

Student finance in the United Kingdom is funding that is available for students to access to help cover the cost of their further education. The organisation that is responsible for administering and calculating the extent of the student loan payment is the Student Loans Company.

The Student Loan Company was founded in 1990 and was created to provide students with financial support towards their further education. Currently, student finance can be applied for by students to pay for their university tuition fees and living costs while they are studying.

Every student in the UK is entitled to a loan to cover tuition fees. Tuition fees tend to be decided by the universities and the Student Loan Company will make the payment direct to the educational establishment. Currently, in the UK those studying full time can receive up to £9250 per annum towards tuition fees, and additional funds for living costs known as the maintenance grant.

Repayment Of Student Loans

Student loans need to be repaid in full whether or not the student completes the university course or not. The amount you repay depends on your income and is deducted from your salary in the same way National Insurance and tax are deducted.

You become eligible to repay your student loan (with interest) once your income exceeds a certain threshold. In the UK this threshold is currently around £25,000 per year. Repayments are calculated at 9% on sums over the threshold, and the repayment is subject to interest charges.

WHAT IS MEANT BY HALAL STUDENT FINANCE?

Halal student finance in the UK refers to those financial arrangements that students can access to advance and fund their further education. Any halal student finance or loan needs to be compliant with Islamic finance and Sharia principles relating to money.

Specifically, Islamic student finance means that there should be no interest payable or charged on the loan or fees associated with education. Islamically, interest is considered to be haram and should be avoided at all costs.

The concept of halal student finance is structured to ensure that is adheres to Sharia rules and that the financing of education is compliant with ethical and religious rules. The main principle to be aware of is that the arrangement must not involve any form of interest and the transaction should be non-exploitative and transparent.

For many Muslim students, not having access to halal student finance via the Student Loans Company means they do not pursue their further education goals. The main reason for this is that the current student loan system is based on interest repayments.

Student Loans And Interest

Interest on student loans is an integral part of the system that funds further education. This is generally how student loans operate:

1. Student applies for university, is accepted on to the course, and then makes a student loan application.
2. There are two main elements to the student loan:
3. Tuition fees that cover the cost of the course tuition
4. Maintenance loan that is aimed to help with the living costs including rent, and books.
5. To be eligible for a student loan you need to be resident in the UK and have been accepted on to a course.
6. Repayment of the student loan includes interest and the rate of interest depends on factors such as when you took out the student loan. Repayment only begins post graduation and once you earn over a certain threshold.
7. Interest on the loan accrues from when you receive the funds until the full loan is repaid.

In addition to student loans, there are also scholarships and bursaries available for some students. Postgraduates can also apply for student finance but whether they receive it or not depends on their circumstances.

Before considering any form of loan it is important for you to gather all the information relating to the loan and how it impacts you now and in the future. Whilst many see student loans as an investment in the future, there have been concerns raised about the inability of Muslim students to access student finance.

WHY IS IT IMPORTANT FOR MUSLIM STUDENTS TO ACCESS HALAL STUDENT FINANCE?

Muslims want to be able enter and partake in higher education without breaching Sharia rules. Currently, as the UK student loan system is interest-based, this precludes many Muslims from being able to access the funding they need to study further.

Islam prohibits interest and at the moment there is no interest-free funding option for students. There is a need for student finance based on Islamic finance principles that form part of the student loan scheme in the UK.

It's not only the interest element that is a problem for Muslim students. The existing student loan system is subject to change and this could fall into the remit of gharar (uncertainty) in Islam which is discouraged.

Without doubt, a halal payment system for Muslim students will facilitate greater inclusion in the education system.

Islamic Finance And Student Loans

Some key features of a halal student loan include the following:

• interest free loans: it goes without saying that any form of student finance must ensure there is no interest being charged or paid in order for the loan to be deemed halal. Instead, what is expected to happen is that the lending institution or bank charges fees or alternative structures to fund the transaction.
• Ethical: halal student finance cannot be unethical. This goes against the basic Islamic finance principles. Any halal form of finance or funding needs to steer clear of haram industries such as gambling, porn, and alcohol.
• Transparent: for a student loan arrangement to be compliant with Sharia rules, it must be transparent and clear. Both parties in the transaction should fully understand the terms which themselves should be clear and non-ambiguous.
• Risk and profit sharing: a key component of Islamic finance is that there is adequate profit and risk sharing between the parties. The student should not bare all the responsibility and risk in this kind of arrangement.

Consultation On Halal Student Finance

In 2014 the government launched a consultation relating to Islamic finance based student loans. What they found was that of the 20,000 respondents, over 90% stated that there was a demand for Sharia compliant student finance.

In March 2023 the government in the UK (having consulted on lifelong loan entitlement) confirmed that although a Sharia compliant student finance product was not available, it was committed to funding an alternative form of finance for students.

The government discussed several criteria that should be applied in a halal student finance system including:

• repayments should be easy to make
• any alternative system should be operated through the student loans company
• debt and repayment levels should be the same as they are for other students
• the service should be easy to use and transparent

Halal Student Finance And The Takaful System

At the time they were considering halal student finance options, the government concluded that a takaful system would be most appropriate. In Islam takaful refers to Islamic insurance and is based on cooperation and mutuality.

Takaful systems operate without insurance or gharar.

Unfortunately, no halal student finance option ever really emerged. Instead the government focused on other areas of student finance and simply concluded that they would continue to consider halal student loans.

Whilst government controlled and regulated student loans may not be available as yet, there are still halal finance options available. Some financial institutions are offering Sharia compliant loans that could be used for education.

Tips For Students Who Want Halal Student Finance

For students who are looking for halal student finance alternatives, here are some options you can consider:

• Research Islamic finance products and services
• Look into Islamic scholarships
• Speak with Islamic finance advisors
• Speak to your university finance team and ask them for details of hardship funds or grants
• Consider interest-free loans from family

None of the above are ideal for Muslim students but could provide alternative halal funding for further study.

The future of halal student finance is dependent on many factors including the demand, the economic landscape, and the continued growth of Islamic finance. The Islamic finance industry is innovative and dynamic and could partner up with educational establishments in the future.

Increased awareness and education about the need for halal student loans is also something that could potentially speed up the availability of halal loans. Muslim students need to stay informed and alert and always explore all the options available to them before deciding against pursuing further education.