Is staking crypto halal?

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.

WHAT IS LIFE INSURANCE?
Life insurance is essentially a contract between a person and a life insurance company. In exchange for you making regular premium payments, the insurance company agrees to pay out a lump sum to your beneficiaries upon your death. Choosing life insurance policies can be a difficult task as there is a lot of information to plough through online. For Muslims, comparing and choosing a life insurance plan means that additional consideration needs to be given to insurance plans on the market that are compliant with Islam and Sharia laws and principles. Life insurance is about protecting those you love, and ensuring that when you die your estate is and interests are kept safe. Life insurance pay outs provide an essential benefit to dependants and family members. The life insurance policy does not insure the life of the insured, instead, it is more of a financial transaction that protects families of the deceased from unexpected financial risk in the future.

Whilst Islam does not expressly prohibit life insurance, there are some considerations that need to be borne in mind by those looking for Islam centred insurance products.

Life Insurance Plans In Islam

In Islam, life insurance is not seen as contradictory to any Islamic laws or principles. The last few decades have witnessed a monumental rise in the availability and popularity of Islamic banks and finance products in mainstream markets, offering Sharia and Islam compliant products such as Islamic mortgages, life insurance policies and Sharia compliant finance options. Mortgage loans in particular have become increasingly popular amongst people looking for banks that offer financial services that do not contravene any principles of Islam. Conventional mortgage loans were always deemed to be unlawful in Islam due to the interest (riba) elements.

Whilst most life insurance plans do not include interest payments, there have been some questions raised relating to the permissibility of life insurance, particularly when there is an element of risk involved.

Whether the life insurance policy is deemed to be halal in Islam is dependent on the type of life insurance policy you are dealing with.

What Are The Types Of Life Insurance

There are various types of life insurance policies available on the market. However, we will focus on two of the most common types of life insurance policy.

WHAT IS WHOLE LIFE INSURANCE?
This type of life insurance policy is one that ends on the date the insured passes away. Whole life insurance policies guarantee the family a pay out when the insured person dies. These types of policies continue to provide lifelong protection by the operators of the insurance policy. Whole life insurance is also known as life assurance. It essentially operates to ensure that whenever you die your family is protected financially when you die. There is no uncertainty about the monies being paid out, but you do have to maintain premium payments on an ongoing basis.

Whole life insurance is far more expensive than term life insurance when it is compared to term insurance (see below).

WHAT IS TERM INSURANCE?
Term insurance policies are considered to be protective insurance policies. These policies cover lost income when the insured dies and cover things like mortgage costs and the coverage protects you for a limited term.

One example of a term insurance policy is where a person is aged 30 and buys a term insurance policy that costs £20 a month. The terms of the policy guarantee a pay out to your beneficiaries of £100,000 if you die before you turn 50. If you do not die before you turn 50 then the policy comes to an end and the insurer is not required to make any payments. There is no guaranteed pay out to beneficiaries (unless of course the insured dies before they turn 50).

Although used interchangeably, the two terms - life insurance and life assurance - are very different. Both are forms of protection designed to pay out sums when a policyholder passes away. When you compare the two, however, it is clear that life insurance relates to a specific term and life assurance covers the whole life of the insured.

Islam And Life Insurance Plans

When it comes to Islamic life insurance policies, many scholars agree that when the principles of takaful are applied to insurance then it is deemed as permissible Islamically. Takaful is a form of insurance system that is compliant with Sharia law principles, and it basically involves the pooling and investment of funds.

Takaful is a form is Islamic insurance and is based on principles of cooperation, mutuality, joint interests and indemnity/ debt, solidarity, and common interests.

Policyholders of takaful policies are considered joint investors with the insurance operators. The vendors and the policyholders share in the pooled monies and they also share any losses. There is no guarantee of a positive return on investment, and there is no element of definite and fixed profits.

Muslims looking for Islam and Sharia compliant life insurance policies and products that contain terms that do not contravene Islamic laws need to ensure that they choose policies that do not include the following:

• any element of interest
• uncertainty
• high-risk
• ambiguous terms
• gambling

These are all prohibited in Islam.

The basic concept of takaful is that a group of people pool their funds together in a way that does not generate profit, but acts as a mutual benefit to those within the group.

Takaful is about communal, charitable ventures.

The principles of takaful in Islam can be summarised as:

• co-operation between policy holders
• losses and liabilities shared
• uncertainty eliminated or minimised
• No advantage for one party over another

In Islam, the concept of insurance is takaful based - a form of social solidarity. The takaful is based on principles of co-operation and trustees that safeguard the position of each person who has pooled their funds. Muslims looking for life insurance policies should seek to find products that are based around the concept of takaful.

Life insurance with takaful is considered to be fully halal, and provides financial protection alongside long-term savings.

Gharar And Life Insurance

Life insurance is considered to be an important financial planning tool, aimed at providing protection for the family and children of the deceased. However, Muslims looking for Islamic insurance products and services have raised the question about whether some life insurance policies, in particular term insurance policies, contain elements of gharar that deem the policies non-Islamic.

Gharar basically refers to uncertainty, risk, and deception. In transactions where there is a speculative element or a degree of uncertainty.

As term life insurance policies tend to involve an element of uncertainty about whether the pay out will be made (for example, if the insured passes away during the term of the insurance), there have been questions about whether this level of uncertainty leads to gharar. the uncertainty of death, that is only in the hands of Allah (SWT) is deemed to add a nuance of gharar to term life insurance policies.

Whole life insurance policies (life assurance policies) are deemed to be compliant with Sharia laws as there is no element of risk or uncertainty as the pay out is made on death. The certainty lies in the fact that we all die, and there is a guaranteed pay out.

Islam prohibits transactions where there is gharar - uncertainty. Whilst it can be argued that term life insurance policies have an element of uncertainty as none of us really know when we will die, modern insurance policies are less speculative than we like to think. Insurance companies will undertake due diligence based on the health and history of the insured to make sure that the risks are measurable and contained.

Also, it is important to note that, historically, Islam has permitted some gharar is transactions that provide a great benefit and this argument can be applied here.

Maysir And Life Insurance

Conventional insurance policies, particularly term insurance policies, require that policyholder could lose all the sums they have paid in to the policy if they do not die within the term. Maysir refers to the gambling element within insurance policies. In term insurance policies, whilst there is no profit element, if the insured does not die within the term then the insurance vendor does profit from the premiums paid in.

Islam prohibits gambling, and transactions where there are elements of gambling.

There are some Muslims who may think that term life insurance policies and products contain elements of maysir due to the uncertainty relating to the timing of the death, benefits, and pay out. However, unless a policy contains huge elements of uncertainty and elements of taking a gamble, it is unlikely that maysir fully applies. Ultimately, the responsibility lies with the person looking for the insurance policy to ensure that it does not contravene any Islamic laws or rules. This is why it is always best to search out policies that are based on Islamic finance rules.

Riba And Life Insurance

We know that riba (interest) is not permissible in Islam, and this is why so many mortgage loans and bank products on the market are not Sharia compliant. Riba usually comes into play in endowment insurance policies that promise a payment that is guaranteed.

Often in endowment policies, the insurance funds are invested in financial products and businesses that may contain elements of riba.

Islamic Insurance Policies

Muslims looking for insurance policies that comply with Islam and Sharia laws relating to financial products and services need to ensure that elements of uncertainty, risk and interest are not present in the insurance products they invest in.

Those looking for insurance policies that do not contravene any Sharia and Islamic principles should make sure that they undertake due diligence on the contractual terms of the policies and compare and contrast them.

We know that takaful is deemed halal in Islam, so any insurance policy that complies with the principles of takaful should also be deemed to be permissible. If you have a policy with insurers who invest the monies and the investment is in areas deemed haram by Islam (ie industries related to alcohol, gambling, porn etc), then you should look to switch to a policy that is more Sharia compliant.

Conclusion

The key to ensuring you have a life insurance policy that is Sharia compliant is to question what type of policy you have. Is it an investment based policy? Is there an exchange of money? Does it feel speculative? Where are the funds invested? Is there an element of risk that may lead to a cause of action against the insurance company? These are all questions that need to be addressed when looking for a Sharia compliant insurance policy.

Most reasonably minded people would agree that getting your financial affairs in order and protecting your family from financial risks in the future is a responsible action to take. Some people have speculated that taking out life insurance could incentivise others to murder the insured, but this is rarely the case. Insurance policies act as a form of protection, particularly for those who do not have substantial have assets or real property. Life assurance/ whole life insurance policies are considered to be compliant with Islamic rules.

Before you take out any life insurance policy, check for elements of gharar, riba and maysir. These three concepts are not permissible in contracts according to Islamic law.

Islamic finance has historically played a significant role in financial inclusion in countries where Islam is a major religion, but it has not been accessible to Muslims in the West until very recently. The growth of Islamic finance has catapulted financial inclusion in previously overlooked groups and has ensured that businesses operating under Islamic principles have opportunities to access funding options and scale their growth.

The foundations of Islamic finance that rest on the principles of anti-usury and no interest have traditionally seemed to be at odds with the concept of successful business and entrepreneurship. After all, usury - leveraging interest rates – is a key component of traditional business growth. However, when it comes to Islamic finance one of the central foundations is that money should not make money, hence receiving or paying interest is not permissible.

In recent years the financial sector has realised the potential of Muslim entrepreneurship and investment, and has offered more inclusive Sharia-compliant financial services. The Islamic finance sector is growing up to 25%[1] each year, and this shows the demand is there for Sharia-compliant finance and banking.

Islamic Finance Principles

What are the main Islamic finance principles that impact on businesses? Islamic finance includes certain prohibitions, rules, and restrictions:

• Gambling (maisir): any form of gambling or speculation is prohibited.
• Contractual ambiguity (gharar): contracts with too many uncertainties or risks are considered gharar.
• Payment and receipt of interest (riba) is not permissible.
• Endowment (Waqf): this refers to a philanthropic actions where the benefit serves specific beneficiaries.
• Interest free loan (qard) where there is no interest payable by the borrower on the loan.
• Insurance (takafuI) refers to a common pool or fund where monies are redistributed to members as and when the need arises.

Combined with the principle of charity (zakah) these Islamic finance principles are centred on inclusion and social solidarity. Promoting socio-economic inclusion, benevolence, and growth via the redistribution of wealth is one of the central concepts of any Islamic finance system.

Islamic Financing Arrangements

Examining the Islamic finance principles above, it is easy to wonder how financial institutions that offer finance based on Islamic Sharia principles actually make money. The answer is that the different types of financial vehicles enable financiers to make money through various financing arrangements. These arrangements facilitate profit sharing and risk management [2].The most common Islamic Financing arrangements include:

• Murabaha: this refers to an arrangement based on profit and loss sharing where both financier and businesses share in the profits and losses. This principle is applied in mortgage transactions where the bank would typically buy the property and resell it to the customer for a price that includes a profit margin.
• Musharakah: this is a joint venture arrangement where both parties contribute capital and agree on the share of profits.
• Ijarah relates to leasehold arrangements whereby the lessor leases the property to a lessee in return for rental payments.

Financial organisations that offer risk-sharing financial solutions, and interest-free banking help to achieve financial inclusion. As you can see from the principles mentioned above, the structure of the arrangement means the bank can make their money by charging rent, sharing profits, or agreeing on a price above market value.

What is Financial Inclusion?

Financial inclusion is defined by The World Bank as a concept that ensures that people and businesses ‘have access to useful and affordable financial products and services’.

When it comes to Islamic finance, one of the key principles that facilitates financial inclusion is ensuring that there is access to savings and credit that is compliant with Sharia law. Research has found that in Muslim-majority countries up to 13% of people do not use conventional banks due to religious reasons [3]. The figures relating to financial inclusion in non-Muslim countries are likely to be much higher.

The United Nations and G-20 have both stated that financial inclusion is high on the agenda if globally we are to achieve sustainable development goals. Financial inclusion, therefore, goes beyond finances and relates to social and economic inclusion.

Why Is Financial Inclusion Important?

Financial inclusion is imperative because access to financial services is a driver of development, growth and opportunity. For Muslims, conventional financial services that are not compliant with Sharia law can result in a period of self-exclusion [4]. What Islamic finance facilitates and promotes is the inclusion of those who have been excluded on the grounds of religion. There cannot be equality of opportunity, access and sustainability without financial inclusion.

Financial services that are affected by self-exclusion:

• Lending and financing
• Insurance
• Savings
• Credit history

Evidence from countries such as Malaysia and Saudi Arabia has shown that Islamic finance not only improves outcomes for businesses but also helps the economy and presents opportunities for investors. Financial inclusion is an enabler of growth that is inclusive, compliant, and sustainable.

How does Islamic Finance Promote Financial Inclusion?

A system of well-designed financial services based on Islamic principles will not only enable Muslims to build financial resilience but ensure that they become active economic participants in the countries they live in.

Digital finance and mobile technologies mean Islamic finance is more widely accessible. The World Bank survey (2017) found that Muslims can often exclude themselves from using the formal financial institutions in place due to religious reasons [5].

Islamic finance is against the concept of asymmetric risk where one party has to lose if another gains. Instead, Islamic finance promotes risk-sharing that is not rooted in interest rates and speculative deals [6]. Certainly, in terms of micro-finance, Islamic finance is an emerging and fast-growing niche that aims to redress the current global imbalance when it comes to micro-finance and enabling marginalised groups to access financing options that work for them.

Islamic finance promotes financial inclusion, and by default creates significant financial migration. It provides an avenue for people with religious boundaries and principles to access financial services that were previously inaccessible to them. Islamic finance is not only about financial inclusion for businesses and individuals, it also attracts Islamic investors. This results in positive impacts at a local, community and global level.

Islamic finance is one of the fastest-growing industries in the finance sector. Governments and organisations including the World Bank and United Nations have all recognised that financial inclusion is imperative if global economic and sustainability goals are to be met. Also, if governments (particularly in the West) want political participation and empowerment for Muslims then financial inclusion is key to achieving that inclusion.

It is also important to remember that Shariah-compliant services are based on principles of equality and social justice. Therefore, financial inclusion and Islamic finance really do have the same end goal in mind – social equity.

References

1. https://corporatefinanceinstitute.com/resources/knowledge/finance/islamic-finance/
2. https://www.theguardian.com/money/2013/oct/29/islamic-finance-sharia-compliant-money-interest
3. https://www.brookings.edu/blog/future-development/2017/06/08/can-islamic-finance-boost-financial-inc...
4. https://www.emerald.com/insight/content/doi/10.1108/IJIF-07-2018-0074/full/html
5. https://globalfindex.worldbank.org/sites/globalfindex/files/2018-04/2017%20Findex%20full%20report_0....
6. https://developingeconomics.org/2019/04/05/islamic-finance-and-financial-inclusion-who-includes-whom...