Takaful

Cryptocurrency, as it is known today, started with Bitcoin as the first decentralised cryptocurrency in the modern world. The first Bitcoin transaction took place as far back as 2009 and ever since Bitcoin has grown into a global phenomenon bypassing traditional finance systems and banks. Islamic cryptocurrency, also known widely as Islamic coin, began to emerge in the late 2010s as the demand for Sharia-compliant digital assets grew.

Islamic coin is Sharia-compliant cryptocurrency that adheres to Islamic finance rules relating to financial transactions and exchange. This article will examine the benefits of Islamic coins and their relevance in the modern world of finance.

Cryptocurrency And Islamic Finance

Over the years Islamic finance and the world of cryptocurrency exchange and platforms have become increasingly interconnected. Islamic coin merges the traditional with the modern, uniting decentralised currencies with Sharia principles.

Not only does the Islamic coin stand as a testament to the thriving impact of Islamic finance on the modern world, but it also offers Muslims an alternative and innovative way of managing their money.

Two notable initiatives relating to Islamic coin are the First Islamic Crypto Exchange (FICE) and project Onegram. Project Onegram is a project that aims to create an Islamic cryptocurrency coin that is backed by gold reserves. Users of the coin are able to store their coins in a digital wallet and transact securely.

FICE is an Islamic initiative aiming to provide an Islamic digital platform for cryptocurrency transactions that are fully compliant with Islamic finance rules.

The main features of FICE are:

• it employs ethical screening
• it incorporates community governance within its structure and operations
• it offers Sharia-compliant trading

FICE and Onegram are both efforts to bridge the gap between Islamic finance and blockchain technology. The aim is to offer Sharia compliant solutions to Muslim investors in the realm of digital and decentralised finance.

Main Features Of Islamic Cryptocurrency

There are some key features that differentiate Islamic coin from other cryptocurrencies:

1. Asset backing - Islamic coin is based on a system of asset backing. This not only provides intrinsic value but also stability in line with Sharia rules. Often the digital coin is pegged to assets that are tangible such as gold, real estate, silver, and commodities.
2. Transparency: Islamic coin transactions must be transparent if they are to comply with Islamic finance rules. This means any trade, investment, platform being used, sales, prices, return, market, service, and exchange involved must be halal and transparent.
3. Sharia law: Islamic coin must be Sharia compliant. This means the coin itself cannot be involved in any form of interest, uncertainty, or speculation.
4. Governance: the governance relating to Islamic coins is usually decentralised. This is looked upon favourably by Islamic finance as it means there is more scope for the community to be actively engaged in the governance structures and processes.
5. Regulation: Islamic coins, whether in the UK or abroad, must comply with regulatory frameworks that govern digital assets and finance. Digital assets are seen as a valuable commodity and many countries already have robust regulatory frameworks in place.

WHAT IS AN ISLAMIC COIN?

Islamic coins are essentially a form of cryptocurrency that is Sharia compliant. Muslims have an incentive to partake in Islamic coin trades and investment as they can be reassured that the coin is fully halal.

Of course, this means the coin must be certified as Sharia-compliant by experts with knowledge of Sharia law and rules.

For example, Islamic coin cannot be aligned or involved with any industry or market that is prohibited in Islam such as the gambling or alcohol industry. There is also a requirement that Islamic coin investment considers social benefit and social purpose as per Islamic finance rules. The ethics of the management and investment of Islamic coin are also important for adherence with Islamic finance.

WHAT ARE THE BENEFITS OF ISLAMIC COIN?

Islamic coin offers many benefits to its users:

• It is Sharia-compliant and aligns with Islamic principles
• It is transparent
• It is stable
• It facilitates the creation of strategic partnerships and ethical investment
• It provides innovative financial solutions
• It supports marginalised communities
• It uses ethical investment criteria
• It facilitates and enables financial inclusion
• It enables cross-border transactions
• It operates on a profit and loss sharing arrangement
• The HAQQ platform screens for Sharia compliancy

Islamic coins offer many benefits to Muslim participants and investors looking for halal ways to invest and trade. As the cryptocurrency financial ecosystem continues to evolve, Islamic coin will play a key role in shaping the future of Islamic cryptocurrency and digital assets.

WHAT IS THE DIFFERENCE BETWEEN ISLAMIC COIN AND BITCOIN?

When considering cryptocurrency, the question always arises about the difference between Bitcoin and Islamic coin. The main difference is that Islamic coin adheres to Islamic finance principles. The very existence of Islamic coin is to ensure that Sharia rules are complied with and there is no such obligation on Bitcoin.

Whilst both coins operate on decentralised platforms, Islamic coin should incorporate more transparent structures of governance leading to greater accountability and proof of adherence.

In addition, another key difference is that Islamic coin needs to follow ethical investment screening and criteria in order to the compliant with Islamic finance. Islamic coins operate on the HAQQ blockchain.

Whilst there are similarities in the nature of both Bitcoin and Islamic coin, the main difference is that Islamic coin adheres to a different set of values and principles. Users of Islamic coin will therefore seek assurance of compliance with Islamic rules relating to finances.

WHAT IS THE FUTURE OF ISLAMIC COIN?

More and more Muslims are looking to invest in and trade in Islamic coin. The Sharia Authority which was formed for the purpose of making decisions on the validity of cryptocurrency has stated that Islamic coin is a financial asset that can be traded whether that is by sale and purchase, or traded for goods and services.

Islamic coin holds great potential in the crypto world. As the crypto ecosystem and infrastructure continue to evolve there are some trends that suggest Islamic coin will see great growth in the coming years:

• Global financial inclusion: Islamic coin is playing a central role in making sure underserved Muslim-majority regions are able to partake in digital currencies. The demand is already there and is growing.
• Islamic finance growth: as the Sharia compliant finance industry grows so too does the demand for the accompanying digital ecosystem.
• Evolving markets: as the dynamics of markets in the world continue to grow and develop, Islamic coin is predicted to grow alongside them. Collaboration and innovations are already being seen across many different regions.
• Adoption: increased adoption of Islamic coins will lead to greater liquidity, market development, and acceptance.

WHAT ARE OTHER HALAL COINS TO INVEST IN?

Whilst the list of halal cryptocurrencies is growing, it is important to note that cryptocurrencies as digital assets are not deemed to be automatically compliant. They need to be screened by experts against Sharia principles. Some coins that have been deemed to be halal include:

• ZRX
• ELF
• Aion
• Alchemy Pay
• ASTA
• BEAM
• Cardano ADA
• Chainlink

There are many other coins that are deemed to be Sharia-compliant, but in each case you must do your own research and satisfy yourself.

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.

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.