There was an interesting talk given by CFA Ireland on the topic of Islamic Finance and Sharia compliant financial products. The long and short of it is that there are no retail Islamic finance products widely available in Ireland at present, there are two or three Sukuks domiciled here.
So what can a Muslim living in Ireland do in order to remain Sharia compliant? The good news is that a person can essentially engineer their own Islamic Finance products at home, and this is perhaps the reason that there has not been a bigger uptake or creation of strictly Islamic products in both the west and in predominantly Muslim countries, even in Pakistan the uptake on Islamic Finance products is only c. 5%.
Part of the reason is that Islamic Finance products often come with a ‘Faith Premium’ which means the cost of being Muslim is significant if you choose to use products that are in strict compliance with your religion. It is important to note that it is in the area of ‘interest’ or ‘usury’ that Islamic Finance distinctly differs with run of the mill finance, usury is forbidden in the Qu’ran.
However, many Islamic Finance products can be engineered at home so we will look at them now.
1: Current Account that pays interest – In a current account or indeed, any interest paying account you can easily get around the usury laws by taking any interest and giving it to charity, using and utilising only our own money.
2: Mortgages – This is a little harder, but essentially you would need to rent and stay renting until such time as you can buy with cash. Having said that, with rents at all time lows and vacancies at all time highs it could be a good time to negotiate a ten year lease and start saving as much as you can so that you can afford the price of a house at the end of that time.
3: Investment – Equities are fairly compliant already, you can receive dividend which is a share of profit, and the values can go up, that is a market transaction, it is only when the element of usury enters that you have issues, so you could buy equities but not via a margin account. Equally, there are certain things that are banned such as alcohol company stocks etc. so it is important to look at any fund and consider the underlying stock if you want to invest via managed funds.
The fact that Ireland has an increasing Muslim population is without doubt, people often (mistakenly) think of Muslims as being from only Arab states, in fact, much of the northern half of the African demographic is primarily Islamic, that means people of all varieties be they black, or north African arab, equally, many of the emigrants from former Yugoslavia are Muslim, as are many Filipinos and Indonesians living here so the chances are that there are many more Muslims in Ireland than the average person easily realises, and this diversity in our national make up means there are new requirements in many services including finance.
The question is whether it warrants a specifically Islamic Finance approach and that is really the rock upon which potential business models here may perish because in the absence of a ready made product, many of the Sharia compliant concepts can be home made.
Hi Karl.
Hope you are hanging in there.
I know you speak to Charlie Weston alot and so, as a regular reader of your Blog, would be interested in your views on his article in relation to ‘outlawing’ broker commissions. Once again Mortgage Brokers find ourselves having to defend our existence and the value we bring to our clients. Charlie is an experienced financial journalist so he should be aware of some basic facts in relation to Mortgages and Commissions. I know he has to sell newspapers but feel the article is grossly unfair and portrays a very shady image of Mortgage Brokers. Knowing you always have a view on most mortgage related issues, I would be interested in your opinion on the article. My opinion, for what it is worth, is that the following key facts were ignored when the article was being written.
-Brokers have a duty of care to their customers. If we dont act in the best interest of our clients we leave ourselves open to severe sanctions (including withdrawal of Authorisation)from the Financial Regulator. We also run the risk of losing our most valuable assest i.e our customers.
-Different lenders have being paying different commission rates on mortgages for the past 5 years. I am amazed that Charlie has only realised this now. If Mortgage Brokers were chasing the highest Commissions instead of giving best advice we would have been exposed long before now,
-The article gives no credit the intelligence and astuteness of today’s mortgage customer. Try to pull the wool over their eyes at your peril.
-Charlie finishes the article by asking the question, when did the interest
of consumers ever matter in this country? Yet in the previous paragraph Charlie is saying that consumers should pay a fee for a professional service which mortgage brokers provide to consumers free of charge at present.
Apologies for bending your ear but as someone who speaks to Charlie on a regular basis would be interested in your opinion on his motives for writing such an article.
Regards,
Gerry
The spread of Sharia finance is simply Silent Jihad, i.e., non-violent Jihad. Western civilizaion is committing suicide. Eyes right! Everybody face Mecca!