| Islamic finances | | | | £1,200 can be made annually, and the |
| If you're Muslim and are concerned about financial | | | | moneycan be invested in savings accounts or in |
| products that complywith Sharia Law, there are | | | | stocks and shares, or acombination of both (a |
| more and more options available to youtoday. | | | | stakeholder account). |
| The first Islamic bank in the UK, the Islamic Bank | | | | A Sharia-compliant child trust fund is also available |
| of Britain,opened its headquarters in Birmingham in | | | | for the childrenof Muslim families, and is provided |
| 2004, offering a range ofproducts and services | | | | by the Children's Mutual. It's astakeholder account, |
| such as pensions, mortgages and loans. | | | | which invests in the stock market until the |
| The main requirement for financial products and | | | | childturns 13 and then transfers the funds into a |
| services under Sharia | | | | savings account or lowerrisk investments such as |
| Law is that they neither charge interest nor pay it | | | | government bonds. This aims to reduce theimpact |
| out, as makingmoney from money is considered | | | | of any stock market slumps in the run-up to their |
| usury, and that they do not invest incompanies | | | | 18th birthday. |
| that are deemed unethical, such as those | | | | All investments are made in funds that don't |
| connected withalcohol, tobacco, pornography or | | | | compromise Islamicprinciples, and no interest is |
| gambling. | | | | paid on the savings. |
| What often happens when providing loans is that | | | | Mortgages |
| the bank will purchasean item for the customer at | | | | As mortgages are interest-charging loans, they |
| a set price and rent it or sell it to them,with | | | | are not consideredacceptable to the Islamic faith. |
| repayments made in instalments. The bank | | | | However, as most people can't affordto pay cash |
| makes its money bylevying a charge on the | | | | to buy a property outright, there is a demand for |
| customer's payments. | | | | Sharia-compliant mortgagesamong the Muslim |
| With investments, Islamic finance works on the | | | | community. Many high street banks now offer |
| basis of sharing therisk as well as the reward. | | | | suchproducts, as does the Islamic Bank of Britain. |
| Both the customer and the bank agree onterms | | | | An Islamic mortgagenormally works by means of |
| for sharing the risk of any investment and split | | | | ijara, a leasing agreement in which the |
| any profitsequally between them. | | | | bankpurchases the property on behalf of the |
| The four main modes of Islamic banking are | | | | customer and charges rent tothem (including a |
| known as murabaha, where apurchase is made | | | | handling fee) until the purchase price is repaid, |
| by the bank and re-sold to the customer without | | | | atwhich point the customer owns the property |
| anyinterest payments; musharaka, a partnership in | | | | outright. As with othermortgages, the bank |
| which the rewards andrisks - i.e. the profits and | | | | retains the rights to the property until this point. |
| losses - are shared by both the bank andthe | | | | Bank accounts |
| customer in an investment; mudaraba, where | | | | To comply with the Islamic faith, bank accounts |
| someone places theirinvestment in the hands of | | | | should neither chargenor pay interest. This |
| an expert who invests for them and sharesthe | | | | normally means that there will be no overdraftor |
| profit but doesn't bear the risk of any losses; and | | | | credit card facilities on current accounts, and that |
| ijarah, arental agreement made in order for the | | | | savingsaccounts invest money to make a profit |
| customer to obtain goods, inwhich rental | | | | rather than receive interest onit. |
| payments are made over a specified period and | | | | Pension schemes |
| the bankreclaims the goods at the end of it. | | | | A few financial organisations now offer Islamic |
| Many of the high street banks offer Islamic | | | | pension schemes,allowing Muslims to invest for |
| products, and there aresome Middle Eastern | | | | their retirement without having tocompromise |
| banks with branches in the UK that | | | | their beliefs. Such schemes invest only in funds |
| providefinancial products and services suitable for | | | | consideredto be ethical under Sharia Law - i.e. no |
| muslims. | | | | investment in companiesinvolved in alcohol, |
| Trust funds | | | | tobacco, betting or pornography, or any |
| The government introduced child trust funds in | | | | companiessuch as banks that profit from charging |
| 2005 to help new parentsto start saving for their | | | | interest. If any dividendsarise as a result of |
| child's future. Upon the birth of a child,they are | | | | business involvement in any of these areas, |
| given £250 in vouchers to invest on their | | | | themoney is 'purified' by giving it to charity rather |
| behalf, and anadditional £250 on the child's | | | | than awarding it tothose investing in the scheme. |
| seventh birthday. Additionalcontributions of up to | | | | |