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.