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It is my position that modern Islamic finance is not fit for purpose – it is not helping Muslims in avoiding Riba, and instead is pushing Muslims further into debt. I outline my position in detail [HERE]. 

A question that I am frequently asked is “So what is the solution?”. This is what I wish to discuss here. 

The first thing to establish is – what, precisely, do we need to solve? My position is that the problems can be summarised as follows: 

• Muslims are excluded from much of the finance space due to ethical constraints imposed on us by our faith 
• As such, many of the benefits that would otherwise be available to us, are not available 
• All (meaningful) attempts at delivering solutions in this space have been no more than the re-modelling of debt and Riba into Islamic products that are indistinguishable from debt and Riba 
• The primary cause of this re-modelling of debt is that we have chosen banking (via Islamic banking) to be the primary mode of delivery of financial solutions to Muslims 

When we then begin to consider what solutions are required, it is relevant to assess solutions that will solve one or more of the problems highlighted above. The key challenge to face is this: 

We must move away from banking as the mode of delivery of solutions. 

This is a non-negotiable condition that is required in order to consider any solution for Muslims. Without this, there is very little we can do. 

Notwithstanding this, the concept of a solution can take many forms, and not all of them include a demand to change the financial system of delivery for these solutions. As such, I will present different levels of solutions, which are more accessible to the majority of us, and then move onto other types of solutions that do demand meaningful change to the current corrupt Islamic finance and banking system in place. 

One key point to note is that such injustice only exists because we allow it. 

We tolerate it, we accept it, and we encourage it.  

There are three levels of solutions that we must actively be a part of and support: 

1 Personal level 

2 Community and commercial level 

3 Systemic level 

LEVEL ONE – PERSONAL LEVEL 

Reduce our personal reliance on debt 

This advice will be received openly by some Muslims and in good faith, and others will react negatively. To be frank, the manner in which this advice is received is not that important to me. I am focussed on the message, and while I will try my best to deliver the message in an articulate and sympathetic manner, I will not deliver it in an apologetic manner. 

The basic advice is to reduce or remove your debt obligations. This includes Islamic debt, which I view, with good reason, as no different to conventional debt and Riba. 

1. Home finance 

• Save up to buy a property in cash (very difficult to do) 
• Consider lower priced properties that provide a realistic target for you to save towards 
• Rent, if purchase is not feasible – set long-term goals and timelines to continue your saving and aim to purchase when you are able (if you wish to own a property) 

2. Car finance 

• Buy used, reliable models that you can afford to buy in cash 
• Avoid leases and PCP and other plans – just buy what you can afford 

3. Mobile phones and other consumer items 

• Buy outright and use SIM only plans
• Buy second hand phones
• Delay your upgrades
• Avoid Buy Now Pay Later offers in all cases, even Islamic ones

4. Credit Cards and Consumer debt 

• Use debit cards
• If you feel you need to use credit cards, and really want to use them, use them only for convenience or rewards, and not for affordability, do not build up any credit on them
• Lower your limits according to your ability and needs, and not simply take the higher limits that are offered
• Track your spending, budget carefully

5. Personal Loans – for example, holidays, weddings, or consolidating other debts 

• Avoid loans altogether
• Instead, save up and delay the spend

Central to all of these is the advice – live within your means – buy what you can afford. 

• If you cannot afford to buy it outright, you cannot afford it
• Live one step below your income bracket
• Focus on saving
• Delay gratification – delay before major purchases

In the end, the above is just simple, basic advice for anyone seeking to reduce their living costs and aiming to live within their means – it is not specific to Muslims, and you can get this advice easily from any source. 

This is the first level of advice I would make sure everyone is aware of. 

If you already do this (may Allah swt reward you), or feel you don’t want to, or are unable to follow this advice, then there are other levels of advice I would wish to make you aware of. 

LEVEL 2 – COMMUNITY AND COMMERCIAL LEVEL 

1. Speak out against what is wrong 

• If you see Islamic finance and banking is damaging to Muslims (and if you do not see this, then I can only assume it is due to ignorance), then say so. Tell people, discuss with them.
• We should also speak out to those responsible. We should speak out so that scholars hear us, and regulators, and the Islamic banks themselves, and the governments that enable them. In due course, I will develop written templates that we can use and share, and shall enable us to communicate our dissatisfaction to these parties so they can hear our voices

2. Demand solutions 

• We must demand for things that we want. This needs to be done in addition to the rejection of the things that we do not want. If we want home finance that is not just a conventional Riba mortgage but wearing a thawb and holding a tasbih, then we must act like it.
• We must demand solutions for home finance that are aligned with Shariah, that see funds mobilised to co-invest into property along with the buyer, where investors take risks commensurate with being a co-owner, and the investors then also have the right to profits and returns that arise as a consequence of being a genuine partner and co-owner.
• For this to work, we must also accept that an increase in property value must be shared among the genuine partners in the ownership of the property. Demanding investment capital to replace debt, and then also demanding that tenants have the full right to all of the increase of value in a property is not a just and equitable position to take
• We must support the mobilisation of real funds into this sector, and not just Islamic banks using credit creation to give a loan and Islamic Riba to allow us to buy a home with debt. These real funds can come either from the government or independent bodies of investors, or a combination of both.

3. Support those who are working for genuine alternatives and solutions 

• There are those (may Allah swt reward them) who are working hard to deliver just and equitable solutions to Muslims. We must support them – financially, if we are able, or at least to be vocal in our support and spread the word.
• NOTE – this does not mean supporting anyone that pops into this space and says they are delivering a service to Muslims. In fact, the vast majority of actors in the Muslim financial space are ones that I would never support, and would in fact see them as damaging to Muslims. We must separate these from the above group that aim to seek real benefit for Muslims
• Among these actors that do not deserve our support, and in fact deserve our criticism and should be removed from any solutions, include the following:
  • Those who do not demonstrably deliver world class quality, integrity, subject matter expertise – too often we put our trust into people who do not deserve it and will not treat our trust with the honour that it demands. People who just say they are delivering Islamic products and then hope that the label is enough. They use Islam as a product to make money, and Muslims as their target
  • Those who deliver debt – this is in fact the majority of Islamic fintech providers. In the UK, the majority of Islamic fintechs deliver debt. To me, this is inexcusable, and we must condemn this and reject it. We must reject:
    • All forms of debt that masquerade as “investment”, where the return is guaranteed, the capital is guaranteed and failure to repay the debt is a breach of contract
    • All fund type products (that might describe themselves as income funds or similar products) that focus on the use of debt to deliver returns
    • All forms of Buy Now Pay Later

4. Support those that are actually working to fix the problems that we face, and not just deliver more debt and Riba onto us in the name of Islam and seek to profit from it. These worthy projects can include the following

• Investing into real estate, but without debt
• Helping Muslims to buy homes, without debt, and via co investment, co ownership and partnership
• Helping Muslims to invest in start-ups and other worthy projects, with the proviso that this is extremely risky business, and you should only invest funds that you are fully prepared to lose 100% of them
• Supporting ventures that uplift Muslim communities, whether it is via education, social impact, career guidance – this support will often be voluntary and not an investment
• Investing into real businesses, SMES, that are profit-making and cash-generating – this segment is the one that I feel has the most likelihood of delivering significant impact both for investors and communities. If I had to choose one form of investment ahead of others, it would be this one

All of the above are practical ideas, that any Muslim can do, and take part in, depending on our personal financial circumstances. 

There is another level that needs to be discussed, and this is the most difficult, but perhaps the most likely to support longer term change that is needed for Muslims 

LEVEL THREE – SYSTEMIC LEVEL 

In many ways this is the most important level, and certainly the only level that would result in meaningful change that is long term. The key to understanding the importance of this level of action is to first realise the nature of modern money and the implications of this. This paper is not meant to be a detailed explanation of these underlying matters, so I will simply state the issues at hand. 

Modern money is fiat money – it certainly does consist, in portion, of real notes and coins. But these form a small minority of the total money in circulation. The Bank of England confirms that such physical money only comprises 3% of the money supply in the UK. The figures will not vary significantly for developed nations, because such nations will have a developed banking system and infrastructure in place. You will understand why I say this, when I state that the vast majority of the remainder of the money supply is fiat money that is brought into existence via the acts of private banks lending money. In the UK, at least 80% of total money supply (and perhaps more) exists due to banks creating such “money” via the act of credit creation via loans. 

This matter requires much more detail to present the causes of this and how it works, but the facts remain. The vast majority of fiat currency in existence today exists because banks have created it by giving loans (and charging interest on it – Riba). 

That is why you will see many knowledgeable people in this space taking a position that modern fiat money is impermissible. The general scholarly view is that the money is permissible because we should not be held to account for the process by which it is created. In any case, so the argument goes, what choice do we have? 

Once we understand this nature of modern fiat money, then we will quickly see the futility of trying to use banking as a mode to create platforms for Islamic finance. This is one reason why so much of Islamic finance is focused on debt and lending – it is such an easy model to profit from, and supported by the ability of Islamic banks to use credit creation to lend money (and create fiat money). 

This leads us to the natural conclusion that any financial system built on modern fiat is doomed to failure from an Islamic perspective. A system built on currency that is itself built on debt and Riba is not one which will permit the establishment of an Islamic system within it. Never mind the fact that we have decided to actually base the modern Islamic finance system on banking itself. 

We have decided to operate within a Riba financial system, and that is a monumental task in itself. Further, by deciding to choose banking as the platform for our Islamic system, we have poisoned all efforts to an inevitable process of failure and death. 

Given this basis, there is a growing call (from those who acutely understand this situation outlined above) that a proper Islamic financial system cannot be based within the global financial system that exists. The use of fiat money itself is already an act of recognition of failure. 

This call is to establish a truly sound, and Islamic basis of money. This is not new – there has for decades been a call to re-establish a monetary system based on gold. This has not met with success. Indeed, several wars have resulted from such efforts. The incumbent system will aggressively guard against any such move, and will not hesitate to resort to violence for this purpose. In the recent past, Muslim governments themselves have legislated against efforts in this space. 

One such movement that has gathered force in the last few years is Bitcoin. I am working on the assumption that Bitcoin was not created by a Muslim, as no evidence points to this. Again, the purpose of this paper is not to lay out in detail the reasons why Bitcoin is proposed to be sound money, to have many of the characteristics of gold, and claims to be a modern version that does not suffer the weaknesses that gold displays (when considering the ability of gold to become, once again, the basis for currency and the monetary system, as it once was). 

I respect Bitcoin, in that it is an asset/currency that, at its core, fights against the modern banking and fiat money system. It fights against Riba. This is why I am supportive of Bitcoin. It has been interesting to see growing acceptance, amongst scholars on a global basis, that Bitcoin is indeed permissible. This assessment however remains a matter of disagreement, and that is natural. 

My call is not for Muslims to adopt Bitcoin, or a rallying call to base a new monetary system on Bitcoin, but for Muslims to understand why Bitcoin aims to provide a path that, directly and without doubt, fights against Riba. 

As such, my call here is for Muslims to speak out against modern fiat money, its intrinsic nature which is built upon Riba, and join the call to replace this with an asset that can lead us to creating a truly Islamic monetary and financial system that can be free of Riba.  

If you study Bitcoin, and decide that it is worthy of support, then support it. If you decide that it is not what you wish to support, then don’t support it. But whatever you choose to do, do not remain quiet. Join the call for the abolishment of fiat and adoption of a monetary and financial system that can promote and support the values of our Deen. 

If you don’t wish to support Bitcoin, then find, or demand something better than Bitcoin to support. 

This is a call that is systemic – it is a call from the people to those in authority. Those who should hear this call are the scholars, the governments, the regulators and any body involved in the financial well-being of Muslims. 

Again, in due course, I will be spending some time to see how we can support and mobilise such a call. Change may or may not result, but it remains our duty to speak out against oppression (and the modern financial system is one wholly based on and built on oppression). 

This concludes this paper. I believe that every Muslim, regardless of the level of wealth, education and authority, has a role to play in terms of being part of a solution to Riba. It begins with ourselves in our daily lives, extends to communities and commercial sectors, and then moves to a drive for systemic change to a sound money financial system. 

You can read this and choose to do nothing. That is your choice, and your choice has no bearing on me at all. It will not benefit me, nor hinder me. This is your own responsibility to yourself as a Muslim. Do with this information as you will. 

When I am asked “What is the solution”, my short answer is as follows: 

1. Avoid Riba 

2. Fear Allah swt 

If you consider, properly,  what the impact of each step would be, if these steps are followed properly and fully, I suspect you will realise that you will have no other choice but to take part in one or more of the levels outlined above. If you have no intention of following either of these pieces of advice, then what change can you expect, even on a personal level?  

I am not responsible for you, or your state, or what you think. I cannot do your thinking for you. I only state what I know and suggest what I feel is best for Muslims. 

Safdar Alam