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Islamic Finance Roadshow Update

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Alhamdulillah, today’s Roadshow on Islamic Finance organised by major UK Islamic financial institutions (Islamic Bank of Britain, Alburaq, HSBC Amanah, Salaam Insurance etc.)  was very informative and useful. Although the audience turnout was less than I expected (despite being FREE!), the direct discussions and Questions & Answers Session with the representatives of those institutions were extremely helpful.

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Many questions were raised during the session. Some of them for example, were:

  • why if the Interest rates in conventional finance market fluctuates the rate of Islamic Institutions also fluctuates along side
  • what is the guarantee that during the current recession period the Islamic  banks will not bankrupt and hence our deposit will not be affected
  • whether  the money in Islamic Banks is not “contaminated” during any point of  transactions or any process
  • raising the awareness of people about the availability of various types of Islamic Financial Products i.e. mortgages, insurance and so on.
  • how every move within Islamic Financial institutions are strictly monitored by Shariah compliancy comittee (I forgot the proper term they use)
  • and many other questions.

My own understanding of Islamic Home Financing was that once you agreed with the bank on certain amount of payment (usually rent) for your house mortgage that rent rate should not be affected irregardless any Interest Rates fluctuations in the market. If it does then it is not Islamic.  But mashallah, a brother from Islamic Bank of Britain give a nice example. For example, let’s say you have two houses and you want to rent one of them out. And you know that your non-Muslim neighbour also has a house that he is renting out and his is charging his tenant £500.00 a month.  Someone else is also renting it for £500.00.  So you think that that is the current rate in the market and you also start renting it out for £500.00.  After 12 month or so the non-Muslim neighbour starts charging £400.00. You also want to compete and bring the rate down to £400.00.  So his new tenant will be paying him £400.00.  The brother says that there is nothing wrong or haram element in that. You can take anything you like as a benchmark.

Another example was that say for example a Muslim shop owner sells a lemonade and his next door shop keeper sells a beer (an alcohol which is haram).  Next day he decides to raise the price for his beer for 5% because there is a demand for whatever reason. Muslim shop owner also decides to put his price for the lemonade  up for 5%. So there is nothing that prohibits him from doing so and it does not make it haram for him.

Similarly, if the Bank of England raises his Interest rate, it is not impermissible for Islamic Financial Institutions to raise their rate too.

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I was also impressed with the way how Islamic Insurance work. Brothers from Salaam Insurance were very pleasant and helpful in explaining of how it works. Inshallah, I will try to cover this topic in one of my future posts IA.

In conclusion, I think this type of roadshows, seminars and workshops should be organised more often in order to raise the awareness amongst the Muslims about the existence of halal alternatives and to dispel any doubts that are in hearts of Muslims regarding the Islamic Financial Products (mortgages, insurance etc). Because many Muslims don’t know about these products and many of those who know are not 100% percent convinced that they are halal.

I remember when Salaam Insurance started rolling out their ad campaign a year ago,  I used to hear from some Muslims saying that it is the same insurance as other insurance companies offer but the difference is that it is owned by Muslims or they just brand it Halal. So insurance according to some Muslims was haram and so it doesn’t make any difference whether you are paying the AA or Salam Insurance.  These types of comments without having any deep knowledge about how Halal Insurance actually works  negatively affect people and seed doubts in their hearts.  Today I approached the representative of the Salaam Insurance and asked him to explain how their system works. And mashallah everything they said (and illustration they provided) made perfect sense and dispelled all doubts.

Even if you have any small doubts about the way they operate or anything, at the end of the day they are Muslims and they say Lailaha Illalah. When they say your contribution will be used for Shariah compliant  investments why should we give preference to conventional insurance companies who don’t draw any distinction between Shariah and non-Shariah investments?

Anyway, overall experience very positive and I pray to Allah that He makes these Muslim brothers successful in their pure intentions and help them in their efforts, inshallah biithnillah.

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  1. Sis says:

    Assalamu Alaikum,

    JazakAllah Khair for clearing our doubts about Salaam insurance. I wasn’t able to attend the event, but your posts are quiet helpful to understand the difference.

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  2. admin says:

    Walaykum assalam,

    Thank you for your comment. We are happy that it helped you to understand the concept of Islamic Halal Insurance.

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