JACKSON...VM is working with the Muslim community and is aiming to have halal financing by 2024, subject to regulatory approval. (Photo: Karl Mclarty)
Ethical financing
GETTING financing as a Muslim is hard in non-Muslim countries, because it involves interest-free loans and a degree of transparency (read: no fine print) which our financial system is not used to. But Fahad Siddiqui, a consultant with IBM who has helped to set up a half-dozen halal financial institutions across world, believes the model can be adopted in Jamaica without impacting the profitability of financial institutions.
“Islamic finance is the world’s only religious-based financing system. It is complete and it touches everything. We have a clear Islamic financial system described in the Quran,” Siddiqui outlined to his audience at the empower seminar and business expo that was put on by the local Muslim community on Sunday.
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“The principles of Islamic finance are in practice since the dawn of Islam starting in the 17th century…the holy prophet Mohammad (peace be unto him) supervised the implementation of Islamic finance himself,” he pointed out.
“The most important point is that the prophet…put the very highest and best standard for financial transition, which includes transparency, honesty, fair dealing, full disclosure,” said Siddiqui.
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Fahan Siddiqui, an IBM consultant who has helped set up several halal banks, outlines how the entities work (Photo: Karl Mclarty)
Siddiqui said if halal financing was applied, a level of transparency would be involved in the system to prevent issues such as the global financial sector meltdown which happened in 2008, and then the cryptocurrency meltdown which is happening right now, where US$1 trillion is wiped out.
“We have seen Islamic finance as the solution for the strongest financial system you can think of, because the principles of Islamic finance are God-made, and not man-made, and therefore are free from corruption, exploitation, greed, complacency, monopoly, inefficiency and concentration of wealth in few hands. These ills have caused many financial crises in the world and Islamic finance is free from them.”
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He said such financing is involved. “For example, if you want to buy a pencil, a conventional bank will give you money to buy pencil and they don’t care what you do with that pencil. They don’t care what quality it is. However, in the Islamic financial system, the transaction would be similar, but what they will do is they will ask you what you’re going to do with that, and then they go to buy it first, make sure it’s working, and then they transfer the pencil to you on, for example, on a rental basis until you complete the payment, during which time, the bank will be responsible to upkeep it.”
Kareema Muncey, CEO of Home Choice Enterprises, praises VM Group for working with the Muslim community to source financing. (Photo: Karl Mclarty)
The concept is foreign to Jamaica’s banking system. Siddiqui is already discussing a halal financing with the VM Group which has so far been partnering with members of the Muslim business community.
“We saw the need in the Muslim community to be financed and because we didn’t have the options to have Islamic financing outside, wih our partnership with VM, they have been friendly with us. They have managed to give us Islamic finance, so I thought of sharing that with the Muslim community,” Kareema Muncey, CEO of Home Choice Enterprises, told the Jamaica Observer.
VM has formed a close bond with the Jamaican Muslim community. The hope is other banks will come onboard to provide halal financing solutions, to both Muslims and non-Muslims alike.
“We actually see it as permissible finance because it’s actually financing that could also be accessed by traditional seekers of banking finance,” Dwight Jackson, assistant vice-president of capital markets at VM Wealth, told the Business Observer. He said since halal financing is similar to lease financing, the VM Group has decided to look on the avenue as a new line of business for Muslims who have effectively been excluded from the banking sector which follows traditional western financing methods. He said, having brough in expertise from consultants who actually set up such options across the world, the VM Group is looking to launch halal financing, “if not next year, certainly, not longer than 2024”. The issue now is to show the financial regulator, the Bank of Jamaica, how the model will work.
However, as it stands, the VM Group has launched retail products which include housing finance, motor vehicle finance, and other retail-type financing, as well as commercial-type financing to the Islamic community in Jamaica.
Jackson said the early research shows it will be profitable for the VM Group and also gives the financial conglomerate the opportunity to be more inclusive in its lending practices.
The Islamic Development Finance Corporation predicts that global Islamic finance asstes could reach US$3.8 trillion by 2024, up from the current US$2.7 trillion driven by sharia-compliant products, chiefly across Africa.
