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