In the United States, millions of American Muslims adhere to the dictates of their faith by avoiding the common banking practices of usury or interest-bearing loan payments. With the growing availability of Sharia (Islamic law) compliant Islamic Banking, American Muslims can participate in the American dream of home ownership.
In the Holy Quran, Allah commands, “Oh those who believe, do not consume Riba (interest) doubled and multiplied. And fear Allah so that you may be successful.” (Surah Aali Imran, Ayat 130)
Usury is forbidden in Islam, Christianity, and Judaism, yet the modern banking system is based on the practice of charging compounded interest which is immoral. Many people believe that the Islamic banking system is fairer and more equitable than traditional Western banking systems.
Shariah-compliant investment funds have outperformed conventional investment strategies in recent years. According to Morning Star, an investment research outlet, “Globally, Shariah-compliant strategies have grown over the past decade. Shariah-compliant total assets doubled to CAD $60.4 billion at the end of February 2023, from CAD $30.3 billion in February 2013. The number of mutual funds and ETFs [electronic funds transfers] also more than doubled from 327 to 669 in that period. And some investment vehicles didn’t report their AUM [assets under management], so these numbers are likely understated.”
For many decades, American Muslims have searched for solutions to the fundamental financial obstacle of interest-bearing financial services. Today, Islamic Law compliant financial services such as Islamic mortgages are available in the United States. Halal investment funds are offered by the most prominent financial services companies in America.
One of the most prominent Islamic mortgage companies is Guidance Residential, operating in 34 states. Guidance Residential has an independent Shariah Board composed of notable scholarly authorities headed by Justice Muhammad Taqi Usmani, who is also the chairman of the Shariah board for the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
According to Alim Mahmood Abdussabur Al Azhari, Faculty of Islamic Law of The Muslims of America Inc., “Justice Muhammad Taqi Usmani is regarded as a God-fearing and respectable Muslim scholar.”
Some notable Islamic investment firms are Wahed Investments and Iman Fund. Both funds claim to be Shariah-compliant, meaning that they adhere to Islamic principles avoiding involvement with businesses related to alcohol, tobacco, pork and its derivatives, conventional financial services from banks, including insurance entertainment like gambling, cinemas, pornography and music. Every halal investment fund must have a Shariah board which conforms to standards such as that of the AAOIFI. According to the Iman Fund, “Shariah compliant investment funds are available at Charles Schwab, TD Waterhouse, Scottrade, Vanguard, and Fidelity. Dow Jones and Dow Jones Islamic Market US Index are both services of Dow Jones & Company, Inc.
In the Ma’ariful Quran, the commentary of Holy Quran points to that of Surah Al Baqarah, ayat 275, “The Prohibition of Riba, From these verses begins the description of the forbiddance of riba (usury) and the injunctions related to its unlawfulness. This issue is very important from different angles. On the one hand, there are the severe warnings of the Quran and Sunnah and on the other, it has been taken today as an integral part of the world economy. The desired liberation from it seems to be infested with difficulties. The problem is very detail-oriented and has to be taken up in all possible aspects.”
It should be understood for Muslims, interest must be avoided as much as possible and only taken out of bare necessity while living in an un-Islamic country. Due diligence should be observed when participating in financial dealings which claim to be Shari’ah compliant. One should consult the learned and scholarly Muslims of their community to be sure these activities are in alignment with their adopted school of Islamic Jurisprudence.
-This article was reviewed by Alim Mahmood Abdussabur Al Azhari, Faculty of Islamic Law of The Muslims of America Inc.
M.S. Ahmad Qadri