Halal Mortgages UK

If your business is to grow, you need to invest in it. Whether the business is a start up, just getting going, or an established firm looking to expand, it needs cash to pay for recruitment, infrastructure, marketing, stock or whatever it is that you need for growth.

Choosing the way to fund your business growth can make a huge difference to your firm's future. While raising finance has one objective - to give you more working capital to invest in growth - the method you choose can have significant implications.

There are different routes for raising this finance. You can put money into the business yourself, take out a bank loan, receive capital from an external investor or take one of several other options. Factors that influence your choice include why you want the finance, the amount involved, your attitude to risk and business ownership, the assets available and your plan for repaying the funds.

How much and for how long

Before entering into a funding arrangement, it's important to be very clear on how much money the business needs and the plan for repaying it. You're investing in future growth, meaning potentially more sales and more profit, but how long will it take for these to come through? Preparing a detailed budget and cashflow gives you clearer visibility of how long it will be before you can repay. While you can't predict the outcome of your business growth activities, you can, using some reasonable assumptions, form a good idea of what's likely to happen.

Armed with this information, you're now in a better position to choose the right funding option for your business.

Debt finance

Raising money for your business can involve borrowing money from your family, a bank or other financial institution. Borrowing, or debt finance, can take the form of a loan, a credit card, invoice finance or some alternative mechanism, such as peer-to-peer borrowing. You're committing to make repayments over a period of time, usually paying interest on the amount borrowed.

Debt finance is either secured or unsecured. A secured debt is where the amount borrowed is linked with an asset, such as a building, and the lender has rights over that asset should you default on making the agreed repayments. You're giving the lender some security that they'll get their money back should your business become unable to repay.
An unsecured debt is not linked to an asset, making it harder for the lender to recover their money. As a result, the interest payments on an unsecured arrangement are often higher and the amount you can borrow is lower. Many financial institutions ask that a director signs a personal guarantee, making them personally responsible for ensuring that the debt is settled.

One risk of debt finance is that the business can become trapped in a debt cycle. You're continually borrowing and paying interest, which eats away at profits. Debt finance can be hugely useful, but its use should be planned and managed.

Equity finance

Equity finance means exchanging part of your business in return for a cash investment. This can be a popular approach for a startup company, particularly where high growth is anticipated, but it needs substantial investment to get going. Venture capitalists and angel investors are always looking out for investment opportunities like this - a business they can buy into that will give them a high return, years in the future.

Because equity capital means giving up ownership of part of your business, it can also mean handing over an element of control. The extent of this should be agreed in advance, in order to set clear expectations. Some investors are comfortable with leaving the founder to manage the business while others want some input into strategic decisions. This can be useful where the investment comes from someone with solid commercial knowledge and experience that they are able to share. Some angel investors want to provide mentorship as part of their investment.

Business angels and others willing to make an investment in equity will want some assurance as to how they will get their money back, and more besides. This could be in the form of dividends or as proceeds from the sale of the business.

The benefits of equity investments include access to larger sums of capital, and potentially, access to the expertise of their investor and their network of contacts. The downside can be loss of total control.

Asset finance

Your choice of funding is broader when your business has assets, such as property, equipment or non-tangible items such as intellectual property. An asset has intrinsic value and this value can be released by taking out finance that's secured on the asset. An example of this is a sale and leaseback arrangement, where the business effectively sells the asset, say a major piece of equipment, and then leases it back from the new owner. This ensures that you can still use the asset, but you also get a lump sum payment from the sale.

A related approach to raising money is invoice finance, also known as invoice factoring. This is often used to improve cash flow in a business that raises invoices on credit terms. The company gets paid almost as soon as it's raised an invoice, even though the customer may take 30 days or even longer to settle the bill. As with most such asset finance arrangements, the interest rate on the money borrowed will affect its cost and the impact on the bottom line.

Business finance can also be raised against the value of an asset in the possession of the business owner, typically a private property.

Crowdfunding finance

The sharing of the risks and rewards of doing business has been at the heart of commercial funding for hundreds of years. That's the principle behind the stock market. Today, crowdfunding is a popular solution to the problem of finding investment for your business growth plans. It comes in various forms, allowing you to raise either debt or equity finance. There are a number of crowdfunding platforms online, each of which offers a different approach to both risk and reward for their members.

The Qardus option for business funding

We provide finance to small and medium-sized enterprises with growth potential that the business owners want to unlock. The funding available is from £50k to £200k with terms of between 6 and 36 months.

Our funding process is rooted in Islamic community principles and is certified as Sharia-compliant. As a result, we don't charge interest and we don't work in business sectors considered damaging to society, such as alcohol, tobacco or gambling.

Because of our principles, our funding solution is an attractive option for Muslim business owners, but we also provide funding to business owners outside the Muslim community.

We offer fast, flexible and affordable business growth funding that's firmly grounded in ethical principles.

WHAT IS A PENSION?

A pension is effectively a savings plan that is long-term. It is designed to help you save for your retirement and ensure that you can maintain your standard of living once you are no longer working, without having to worry about finances and bills.

Halal pensions are a Sharia compliant investment option for Muslims who do not want to compromise on their religious beliefs.

Halal Pensions

A halal pension is long-term savings plan that is compliant with Islamic rules relating to saving. Halal pensions are Sharia compliant.

Muslims are required to ensure that their money is managed and invested in a way that does not contravene the Sharia rules relating to finances, and this is why they look for halal pension products.

Difference Between A Conventional Pension And Halal Pension

As mentioned above, halal pensions are specifically geared towards Muslims, but can be utilised by anyone.

Halal pensions are different from traditional pension schemes as they each have different underlying principles and different investment strategies.

Many conventional pension schemes are not compliant with Sharia law and therefore not acceptable to Muslim savers.Halal pensions must have the following elements:

• No riba (interest)
• No maysir (gambling)
• No gharar (uncertainty)

Most traditional pension schemes invest in schemes that will not meet the above requirements. However, halal pension schemes have a Sharia compliant investment strategy. This means that the funds should be invested in assets that are Sharia compliant including real estate/ property and Islamic bonds.

In addition, halal pensions have a different management and market approach than traditional pension schemes. Halal pensions have to be managed in accordance with Islamic principles. These principles centre on the concepts of social and ethical responsibility which we will examine below.

Conventional pensions are more driven and focused on generating revenue and profits. The wealth and revenue growth of conventional pensions are often generated from risky or interest-based investment strategies.

Key Features Of Halal Pensions

If you work in the public sector and pay into a workplace pension it is very likely that you have a defined benefit pension. You should ask your employer for information relating to your pension so you can assess whether it is a defined benefit pension. If it is, then the pension should be halal.

Always check to see what fund your pension monies are located in.The main features of a halal pension include the following:

• Compliance with Islam and Sharia rules: this is fairly obvious but any pension you have must not contravene any Sharia rules about finances. Whilst you have a choice about which pension fund to invest in, it is your responsibility to make sure you seek expert opinion and advice about the investment and the operations of the scheme.
• Prohibited investment: for a pension to be deemed to be halal, investors need to make sure the monies are not invested in haram industries (gambling, porn, alcohol etc)
• No interest: this is one of the underlying concepts in Islamic finance. Sharia rules and guidelines strictly prohibit the payment of receipt of any form of interest. You should be sure to avoid haram bonds or any other investment instrument that relies on interest.
• Ethics: investors are faced with the obligation to act in an ethical and socially responsible way. This means that investments must align with the core Islamic value of transparency and fairness. Investments must adhere to Sharia rules and guidelines relating to finances.

Ethical And Social Responsibility

Halal pensions are designed to ensure that any investment is socially responsible and ethical. This is a fundamental principle of Islamic finance and must be adhered to.

Anyone who manages a halal pension needs to ensure that they do not invest in any industry, economy, market or product that would deemed to be unethical or haram under Islamic rules.

This means the pension monies cannot be invested in industries that are involved with gambling, porn, alcohol, and any other activities not permissible under Sharia rules.

Any profit or return from investment in these industries is haram

Importance Of Having A Halal Pension For Muslims

For Muslims, having a pension is an essential part of ensuring that they plan for their future.

Not only will having a pension provide you with an income for your future, but ensuring the pension is halal will increase its value for those who wish to remain Sharia compliant.

Workplace Pensions

In the UK, you should have a workplace pension, and your employer is legally required to contribute to your pension fund.

In addition to this, it is always a good idea to think about having a private pension. The main benefit of this, other than having a second pension pot, is that you can direct which pension fund to invest in and you have more of a say about where your pension is invested.

Having a halal pension means you have a savings plan that aligns with the ethical and religious values of Islam.

Key Benefits Of Having A Halal Pension

Some of the benefits of having a halal pension include the following:

• Compliance with Sharia law
• Alignment of personal values with financial planning strategies
• Accessibility to ethical investments
• Saving for retirement

Halal Pensions In The Uk

The popularity of halal pensions is growing in the United Kingdom and the rest of the world. Not only are they aimed at Muslims looking for Sharia compliant saving and pension plans, but they also attract ethical investors.

The number of banks and financial organisations offering halal pensions is increasing. Before approaching any organisation offering halal pension products you should always satisfy yourself that they are sufficiently registered and regulated by the FCA. You should also make sure the bank is fully aware of the rules relating to Islamic finance.

Please note that Qardus Limited does not provide financial advice.

ISLAMIC SAVINGS ACCOUNTS - WHAT ARE THEY?

An Islamic savings account, also known as a Sharia compliant savings account, is a type of savings account that is designed to be compliant with Islamic law. Islamic finance rules prohibit the payment and collection of interest, also known as riba.

Instead of interest, Islamic savings accounts typically pay profit or loss sharing. This means that the bank and the customer or account holder share in the losses or profits of the bank's investments.

HOW DO ISLAMIC SAVINGS ACCOUNTS WORK?

Instead of offering interest on deposited funds, an Islamic savings account operates on the principle of profit and loss sharing, where the profits made by the bank are shared between the bank and the account holder.

An Islamic savings must adheres to the principles of Islamic finance. These principles, derived from the teachings of the Quran, prohibit the payment or receipt of interest on financial transactions. The bank offering Islamic savings accounts ensures that the account is not charged or paid any interest.

Islamic savings accounts are also known as interest-free savings accounts or sharia-compliant savings accounts offer a number of benefits to those who choose to use them.

Conventional Savings Accounts

To compare, conventional ISAs are a type of savings account offered by banks and financial institutions in the United Kingdom. ISAs are regulated by the Financial Conduct Authority (FCA).

Conventional ISAs are essentially offer the customer to save money and earn interest on their savings without having to pay taxes on the interest earned. The main difference between a conventional ISA and an Islamic savings account is they way in which they earn money for the account holder.

Islamic Savings Accounts And Sharia Rules

An Islamic savings account, also known as an Islamic finance account or a Shariah-compliant savings account, is a type of financial account that is designed to be compliant with the principles of Islamic law (Shariah). In contrast, a conventional ISA, or Individual Savings Account, is a type of savings account that is offered by traditional banks and financial institutions in the UK.

One of the key differences between these two types of savings accounts is the interest rate. Islamic law prohibits the charging of interest, known as riba, on loans and financial transactions. Therefore, an Islamic savings account does not offer interest on to customers on the deposited funds.

Instead, an Islamic savings account operates on the principle of profit and loss sharing, where the profits made by the bank are shared between the bank and the customer or account holder. This means that the returns on an Islamic savings account may vary depending on the performance of the bank.

Ethical And Socially Responsible Investments

Another key difference between Islamic and conventional savings accounts is the use of investments that are considered to be ethically and socially responsible.

Islamic finance is based on the principle of avoiding investments in businesses that are considered to be harmful to society, such as those involved in the production of alcohol, tobacco, gambling, and other activities that are prohibited by Islamic law. Conventional ISAs, on the other hand, do not have any restrictions on the types of investments that can be made with the deposited funds.

Taxation Of Islamic And Conventional Savings Accounts

In addition to the differences in interest rates and investments, there are also some differences in the way that Islamic and conventional savings accounts are taxed.

In the UK, ISAs are tax-free savings vehicles, meaning that the interest earned on the deposited funds is not subject to income tax. However, the profits earned on an Islamic savings account may be subject to income tax, depending on the specific details of the account and the tax laws in the country where it is based.

It is always best to find out as much information about the savings account you are opening. The bank or provider of the service should be able to help you identify the exact tax implications for you. A comparison of the accounts can also be done via the website of the bank.

Overall, the main difference between an Islamic savings account and a conventional ISA is the way they are structures and the principles each account is based upon.

Structuring Of Conventional Savings Accounts Vs Islamic Savings Accounts

Islamic savings accounts are designed to be compliant with the principles of Islamic finance, this includes the prohibition of interest and the promotion of socially responsible investments. Islamic savings accounts need to ensure they are structured in a way that does not contravene any Islamic finance principles. The structure and the way they progress are important components as the obligation to be Sharia compliant applies to the lifetime of the savings account.

What this means is that the bank offering Sharia compliant savings accounts must ensure it meets all the Islamic finance requirements of operating such an account.

Conventional ISAs tend to be more flexible and do not have the same restrictions as an Islamic savings account would have. However, for Muslims and other customers who do want an ethical form of saving, Islamic savings accounts are useful tools for saving in a Sharia compliant way.

It is therefore important to understand the differences between the two types of savings accounts.

The Benefits Of An Islamic Savings Account

There are over a billion Muslims worldwide. As a result, the principles of Islamic finance and banking have gained increasing recognition and popularity in recent years.

One of the key products offered by Islamic finance institutions is the Islamic savings account.

An Islamic savings account must operate in a way that is consistent with the values and beliefs of Islam, including the prohibition of interest (riba) on loans and financial transactions.

There are several benefits to using an Islamic savings account. Here are just a few:

1. Alignment with religious beliefs: For Muslims, the prohibition on interest is an important religious principle. By choosing an Islamic savings account, individuals can align their financial practices with their religious beliefs.
2. Higher potential returns: Because Islamic savings accounts do not pay interest, banks and other financial institutions that offer these accounts often provide higher potential returns in other ways. For example, some Islamic savings accounts offer profit-sharing arrangements, where the bank shares a portion of its profits with account holders.
3. Increased transparency: Islamic finance is based on the principles of transparency and fairness. As a result, Islamic savings accounts often provide greater transparency than traditional savings accounts, with clear and straightforward fee structures and a lack of hidden charges.
4. Support for ethical investing: Islamic finance prohibits investment in certain industries, such as gambling and alcohol, that are considered sinful in Islam. By choosing an Islamic savings account, individuals can ensure that their money is not being invested in ways that conflict with their religious beliefs.
5. Contribution to the Islamic finance industry: Islamic finance is a growing industry, with an increasing number of people around the world choosing to use sharia-compliant financial products. By choosing an Islamic savings account, individuals can support the continued growth and development of this industry.
6. Higher Returns: Because Islamic savings accounts operate on the principle of profit and loss sharing, they may offer higher returns than conventional savings accounts that offer interest. This is because the returns on an Islamic savings account are linked to the performance of the bank, and the profits made by the bank are shared with the account holder. This means that the returns on an Islamic savings account can vary depending on the bank's performance, but they may be higher than the fixed interest rates offered by conventional savings accounts.
7. Ethical and Socially Responsible Investing: Islamic finance is based on the principles of ethical and socially responsible investing. This means that Islamic finance institutions avoid investing in businesses that are considered to be harmful to society, such as those involved in the production of alcohol, tobacco, gambling, and other activities that are prohibited by Islamic law. By choosing an Islamic savings account, you can ensure that your money is invested in businesses that align with your values and beliefs.

Choosing The Right Savings Account For Your Needs And Values

An Islamic savings account offers a wide range of benefits for savers. Some of these benefits are financial and others are beneficial for those with religious beliefs who want to adhere to Sharia compliant savings.

There has been a significant growth in lenders who are now offering Islamic savings accounts, so it is always worth doing your due diligence to find the right account for you.