Is there an Islamic cryptocurrency?

In recent decades the landscape and number of small and medium-sized (SMEs) businesses has seen a huge transformation. Many of these businesses are formed and led by Muslim entrepreneurs such as Shahzad Younas (Muzmatch), and Ufuk Secgin (Halalbooking.com). With the growth of Muslim entrepreneurs comes an increase in demand for Islamic finance based lending solutions and strategies.

SMEs dominate the world business landscape. They account for approximately 60% of private sector employment. It therefore makes sense that SMEs will require funding options in order to sustain and succeed as a business. With close to 60% of SMEs failing in the first few years, ensuring they have access to adequate funding is critical.

SME lending has historically been centred on the traditional models of funding that are interest based. However, there has recently been a move towards SME lending based on Islamic finance principles.

In the UK, SMEs are considered to be firms that employ less than 250 employees. UK SMEs play a significant role in the UK economy, and the government is keen to ensure that they are sustainable and successful.

SURGE OF SMEs

SMEs account for a significant portion of the world economy. They not only contribute to employment and job creation, they also play a leading role in sustainability and community impact. In the UK a staggering 99.2% of the business population comprises of SMEs.

SMEs are considered to be major employers and they drive local economy growth.

Recent statistics found that the total value of loans to SMEs in the UK reached a whopping £65.1 billion in 2022. This was an increase of over 10% on the previous year and was the official highest on record.

New business lending in the UK totals in the region of £259 million. Demand from SMEs for inclusive and diverse lending options continues to grow.

SMEs AND SOCIAL IMPACT

SMEs play a critical role in society and our economy. Not only do they facilitate and generate employment, they also increase the flow of money from individuals to industries and through society.

At the beginning of 2023 there were estimated to be 5.5 million SMEs in the UK, an increase of 0.8% over the previous year. The professional, scientific, and technical industries accounted for 14% of all SMEs while another 10% are in the retail, trade, and wholesale industry.

Beyond contributing to the economy, SMEs can impact different areas of society. They encompass social development, community wellbeing, alleviating local poverty, job creation, innovation, and reducing income inequality.

SMEs also tend to be more forthcoming in embracing sustainable and ethical practices. They foster financial inclusion by providing local opportunities for local people.

WHY SMEs ARE THRIVING

There are 1 million SMEs in London and over 852,000 in the South East. These SMEs account for 34% of the UK business population. SMEs account for 60% of the employment in the private sector within the UK. They also account for over 50% of the employment in the UK.

As SMEs have grown, so has the need to provide lending that meets their particular demands. Many SMEs do not have the stellar trading history and records of large business.

SMEs therefore need an innovative approach when it comes to lending and funding.

SMEs can come with limited credit history and collateral but bags of entrepreneurial dynamism and innovation.

Distinct from larger businesses, SMEs have unique considerations relating to scale, financials, structure and characteristics. They may have limited access to capital markets, and therefore need tailored and bespoke financial solutions. A one size approach to lending does not meet the needs of SMEs that provide a range of services in the economy.

This is where Islamic finance really comes forth as a viable option for SMEs.

Sme Lending

SME's often demonstrate adaptability and resilience when faced with economic fluctuations, challenges and issues. SMEs are well placed to weather economic downturns and maintaining local communities through change. Lending to SMEs in the UK amounted to £4.8 billion in the second quarter of 2023.

In 2022 36% of SMEs used external funding and finance options. Over 69% of SMEs have stated that they turned to lending options due to cash flow related issued.

For SMEs, obtaining favourable funding options is not as easy as it is for big companies. Perhaps this is the reason more and more SMEs are turning to Islamic finance services.

Islamic finance is a great option of raising funds for SMEs for many different reasons.

For Muslim SMEs that want to avoid interest and want to be Sharia compliant, Islamic finance provides funding options not available in the wider banking sector. Islamic finance is able to adapt to the requirements of Muslim SMEs ensuring compliance and inclusion.

It is also worth mentioning that Islamic finance is based on a risk and profit sharing arrangement. This means that the funder and the SME share the profits AND the risks.

For SMEs, this is a huge benefit as it creates a sense of partnership with support for the new SMEs on the market. SME borrowing has a huge impact on their operations and customer base growth, so it is essential that the SME lending market continues to diversify and educate itself on the needs of SMEs.

Islamic finance is asset backed finance. What this means for the SME is that the financing is linked to tangible assets. In the long term, this is a more sustainable and stable form of financing for them.

Diversity In Business

The great thing about SMEs that often goes unnoticed is how impactful they are when it comes to inclusion and diversity.

In 2020, 16% of SMEs were led by women. Almost 24% of SMEs were equally led by men and women.

Workplace diversity is essential for SMEs as they often operate within diverse local environments. With Millennials currently making up 50% of the UK's workforce (and Gen Z accounting for 27% by 2025), businesses lacking diversity are missing out.

When it comes to investment for the future and the business operations of the SME, they need to ensure they recruit and retrain properly.

Empowerment Through Enterprise

SMEs are known to encourage empowerment through enterprise. This should be done at every stage of the SME process from project initiations, implementations, cost analysis, research, and education.

The result is that SMEs can ensure that they can recognise and eliminate barriers to growth. Enterprise enables SMEs to plan and prepare, ensuring they have the right insight into how to fund their operations and continue to succeed.

For Muslim entrepreneurs there are additional considerations relating to compliance with Islamic finance rules when partaking in financial services and considering lending options.

Why should Muslim SMEs focus on Islamic finance lending:

• Adherence to Islamic rules relating to financial transactions
• Interest free finance options
• Asset backed financing
• Profit and risk sharing
• Flexible finance structures and services
• Financial inclusion without compromising ethics and religious principles
• Community impact
• Flexible payment options
• Lending is not connected to an industry, product or service deemed impermissible by Islam (ie alcohol, gambling, porn)

Faith In Business

Those SMEs that are looking for ethical and sustainable models of finance and lending can find answers in Islamic finance.

Risk sharing, loss sharing, ethical considerations and non-exploitative practices all underpin Islamic finance and support SMEs in a way that traditional financial service cannot.

The investment term for this offer has been successfully concluded

As the investment term for this facility has been successfully concluded we wanted to present some highlights of this offer to investors:

The problem: Dara 77 Ltd, a dental practice, was seeking funds for working capital, to purchase dentistry equipment, and refinance an expensive mycashloan of c.£30,500 at c.50% APR.

The solution: In order to refinance the expensive loan at the earliest possible time and meet their working capital requirements, the company needed a timely injection of business finance. Dara 77 Ltd hence sought to raise a total of up to £60,000 of Sharia-compliant finance on the Qardus platform.

The outcome: The company had a two-year unsecured amortizing finance facility with Qardus, giving it the capital required to support their next phase and pay-off the expensive loan. The funds were drawn down on January 28, 2021.

Final settlement: Dara 77 Ltd made a voluntary early prepayment for the full outstanding balance of the financing facility on May 12, 2022. The Director used the extra cash proceeds from the sale of her home to pay off all her debts.

Payments to investors:Over the term of the facility, investors received their scheduled profit and principal payments each month.

Returns to investors: Investors made a return of 16.2% per year over the term of the facility. An investment in this offer made a return on investment (ROI) of 20.88%andXIRR of 25.31%upon successful conclusion of the investment term. The XIRR function calculates the Internal Rate of Return (IRR) by assigning specific dates to each individual cash flow.

“Excellent service from start to finish, comprehensive and friendly staff that make the full process feel easy. I was seeking growth finance and contacted Qardus and within 5 business days, I had an offer and funds in the bank. Highly recommend, thank you again Qardus”Director, Dental Practice

“This business is a prime example of a UK SME which has strong social impact credentials and that our investors are keen to support. This was also the first female owned business on our platform that got funded in 6 hours! In addition to providing working capital headroom, the funding will also be used by the business to refinance an expensive loan at c.50% APR. With this financing facility, we look forward to watching this business grow”Hassan Daher, CEO & Founder, Qardus Limited

Please remember that when investing in the offers available on the Qardus platform your capital is at risk and returns are not guaranteed. Past performance is not indicative of future results.

In traditional and western retirement planning there was one main model used for investing and that was the one that created the most profit with any given risk tolerance. However, in recent years, the demand for Sharia compliant retirement planning has grown. This growth alongside the demand for more socially responsible investment means that Islamic finance has created Sharia compliant options for retirement planning.

Socially responsible investing is at the heart of Sharia law. What it means for those looking to build a halal retirement fund is that it limits an investor's portfolio to those kinds of investments that are deemed to be socially responsible.

Retirement Planning

Retirement planning is a key part of planning for the future. It is important for many different reasons including the following:

• Maintaining quality of life
• Facilitating financial independence
• Inflation protection
• Reducing financial stress in later years
• Managing longer life expectancy
• Covering benefits and pension gaps in later years
• Legacy planning
• Facilitating early retirement

Retirement planning ensures that you take a strategic and proactive approach in planning for your future. It is a means of securing your financial future with a roadmap for saving, investment and managing your finances.

WHAT IS SHARIA COMPLIANT RETIREMENT PLANNING?

Sharia compliant retirement planning refers to making financial arrangements for your future that do not contravene Islamic rules relating to financial transactions and savings.

Retirement planning in a Sharia focused manner refers to preparing for retirement whilst adhering to ethical guidelines outlined in Islamic finance.

Let's examine some of the key principles related to Sharia compliant retirement planning:

1. Interest - the main rule for halal retirement planning is that you must avoid riba (interest). Islam strictly prohibits any form of interest. If you are planning for your retirement make sure that none of your investments and savings accounts are not linked to interest in any way. In fact, you should ensure that any product, service, or company you deal with does not include interest based products or the payment of interest.
2. Risk and profit sharing: Islamic finance rests on the principle that transactions and deals should result in both parties sharing the risk and profit. This creates a more equitable relationship when dealing with money.
3. Ethical investment: retirement planning that is halal encourages ethical and socially responsible investing strategies. This means that you should look to invest in industries and companies that lead to social benefit (ie education, healthcare, relieving poverty) and stay away from companies that are involved in haram industries such as gambling, war, and alcohol.
4. Charity: although not necessarily related to retirement saving, ensuring you keep up with your zakat and sadaqah payments during your life is important. Not only does this form of charity enhance your adherence to Islam, but it also means that you can set aside money or a portion of your wealth for charitable purposes later on in your life.
5. Avoidance of speculation: if you are retirement planning then you need to be choosing products and investment options that are secure. Avoiding speculative products and markets means your long term planning is on more stable ground. Islam seeks to minimise ambiguity and uncertainty in financial dealings. As an investor, you should seek those investments that are asset backed and tangible.

WHAT IS AN INVESTMENT?

An investment is something that you invest in to generate a return. When it comes to halal retirement planning, a halal investment is one that complies with Islamic rules.

There are more products, services and investment options on the market than ever before. Islamic finance is still a dynamic industry, so for anyone looking to plan for their retirement and future you should know that there are many products already on the market.

When it comes to stocks and equities, Muslim investors can construct a portfolio that is Sharia compliant by ensuring that they research the companies, choosing those investments that meet the Islamic finance criteria of being compliant.

Types Of Retirement Accounts

When planning for retirement there are a few different options. You can either use regular investment accounts and earmark part of the savings specifically for long-term investment. Or, you can use retirement accounts that are created for the sole purpose of future planning.

In the UK, there are Islamic pensions that do comply with Sharia principles. They focus on investing in halal industries and assets, using a halal investment plan.

Another form of long-term investment planning includes real estate. For many people, property is a means of planning for your retirement. There are many halal mortgage options in the UK and European markets for Muslims to access. These mortgages are structured to ensure the individual does not have to pay or be charged interest to the bank that provides the mortgage as a lender.

Sharia Compliant Pensions

As an employee in the UK, it is very likely that you are already paying into a workplace pension. In addition to this, you can also have a private pension to supplement your income in retirement.

There are various Islamic pension schemes available, alongside halal Islamic bonds called sukuk and other investments that are Sharia compliant.

Muslims can also look into having a halal SIPP which are self-invested personal plans. These plans are a type of pension that provide individuals with the flexibility to create their own pension portfolio. A halal SIPP is one where the requirement of the pension investments is that they are Sharia compliant.

SHARIA RETIREMENT PLANS - WHY HAVE THEM?

There are many reasons why you should have a Sharia compliant retirement plan, not least so that you adhere to Islamic rules.

As we become an aging population it is more important than ever to ensure we have the means to live and survive as we age.

Sharia retirement plans are necessary because they:

• are a form of voluntary Islamic pension so you can adequately plan for retirement.
• provide opportunity to manage the risk and return for the future
• create a flexible investment plan
• are Sharia compliancy
• lead to secure, halal financial planning

For anyone looking to build a secure halal retirement plan you need to research and make all the relevant enquiries as soon as you can. Look into banks, financial institutions and services that provide pensions and future planning.

Consult with Islamic scholars and financial advisors who are knowledgeable about Islamic finance and give you accurate information.

Remember, the Islamic finance offerings and landscape is ever-changing and growing and the value of its services should not be underestimated. As the economy continues to fluctuate it is important to understand the commercial and business process relating to retirement planning. Understand what it is you need for the future and start making plans now.

Determining Sharia compliancy is a critical part of halal retirement planning. You need to be able to evaluate an investment and eliminate any element of haram so that it aligns with your Islamic belief system.