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I first realised there was a problem when a financial advisor approached me about managing my money.1
I was working as a trainee in corporate law at the time and invited him into our plush London offices. This didn't disconcert him in the slightest - he was very familiar with these sorts of settings.
He walked me through his beautiful models. I should be accumulating in my youth and decumulating in my retirement. Pensions were good, as was insurance. Financing should be used strategically as a tool throughout my life to smooth out purchases and get onto the property ladder quicker, and tax-efficient investments should be used to build my nest egg.
This was all brilliant and made perfect sense to me. I was ready to go full-on Wolf of Wall Street - but there was one big catch.
Literally nothing he had offered to me was sharia-compliant.
I rang my best friend and long-time business partner Mohsin that evening.
"We need to figure this one out, Mohsin. We're going to have savings soon and we need to manage them properly. And it's completely barmy that in a twenty-first-century world a quarter of the world's population still doesn't have financial products that they can actually use."
Mohsin agreed and, in an evening of discussion, debate, and idea creation, Islamic Finance Guru (or IFG) was born: a blog to share our research into halal investing and personal finance.2
Thus started an eight-year journey (to date) of research, discovery, and building financial products that helped scratch our own itch. In that time, we gained Islamic qualifications, sat our financial advisor exams, qualified as corporate lawyers, got married, and had kids.
Today, only through the grace of God, IFG is one of the most prominent Islamic investing websites globally, with its own suite of financial tools and investment products.
Over this journey, we've had the privilege of interacting with thousands of Muslims also on the same path as us. We've interacted with students just starting out on their journey, single mums looking to stabilise their finances after a divorce, a scam victim who is fearfully looking to invest again for the first time, billionaires who made their money in crypto, and - because we deal mostly with Muslims - lots and lots of doctors. Despite the variety of these backgrounds, these individuals actually had a lot in common when it came to the challenges they were facing in their investment journeys.
These challenges were:
Much of our content on IFG and in this book has been inspired by the questions we've received over the years from our audience members. We have written hundreds of thousands of words, shot over 150 videos, and given talks up and down the UK and abroad on these topics.
But what we had never done till now was condense it all down into one neat package. This book is our attempt at doing just that. It is a distillation of all those conversations, articles, videos, and lectures - suffused with a healthy dose of practicality to get you moving from "learning" to "doing". We hope you enjoy it and learn something new.
But before we dive into the action, it is important to remind ourselves what is at stake here.
The religious texts are very clear - hoarding and passively sitting on cash are frowned upon. The Qur'an says, "But as for him who is stingy and self-satisfied, and denies the good, We will pave his way to difficulty."3
More broadly, zakat is a 2.5% compulsory charitable donation on every Muslim's stagnant wealth every year. Interestingly though, zakat does not generally apply to investments. In other words, zakat is effectively a wealth tax, encouraging the circulation and investment of money, rather than it sitting in cash. We can see therefore that the shari'a - the Islamic legal code - has always been pro-investment.
But today this message has taken on a particular urgency. According to an annual report on global wealth by Credit Suisse,4 the global average net worth at the end of 2021 was $87,489, a staggering 12.7% increase from 2020 and the fastest annual rate of growth ever recorded.
Some quick back-of-the-napkin analysis of their numbers, accounting for Muslim populations, indicates that global Muslim net worth is approximately $16,702. In other words, the Muslim community is approximately five times poorer than the rest of the world.
This can be seen in Figure 0.1.
Figure 0.1 Global wealth.
Source: Davies et al., 2022 / Credit Suisse Group/ Public Domain.
With the exception of some of the smaller Gulf States, much of the Muslim-majority country belt stretching across North Africa and across the Middle East and subcontinent has wealth in the lowest two bands. This puts the task ahead of the Muslim community in a rather different light: we must look after our wealth not just for ourselves, but the greater good. This is particularly so for the most affluent Muslims.
As can be seen in Figure 0.2, the top 13% of the population owns 85.9% of global wealth. That means that if you're reading this book and are lucky enough to be in that bracket, there is an additional onus on you to ensure your wealth is (1) invested and growing; and (2) allocated to investments that do more than just give profit.
We actually ran the numbers on what it would take for the Muslim community as a whole to get back to a level financial playing field, and what we found was that if every Muslim earned around 12% per annum on their savings - roughly 4-5% above the global average returns - it would take just 35 years to close that gap.
Figure 0.2 Global wealth range.
The goal is actually achievable and could even be attained in our lifetime. We've made it our mission at IFG to do precisely this - and this book is a key part of that journey. The more Muslims who are educated about investing well, the more they are likely to invest profitably.
Right, enough preaching, let's get down to business.
This book is divided into four Parts:
The first time you read this book, we would suggest reading from start to finish. Then, when you revisit the book,5 you should just dip in and out of the Parts that are most pertinent to your personal situation. We would expect Part III in particular to become a reference section for your ongoing investment activities.
We also want to make sure that this book isn't just a theoretical primer full of nice platitudes that is read once and then sits on a shelf getting dusty. At the end of this book, we want you to have the toolkit to be able to take control of your finances and have the confidence to use those tools too.
Specifically you should be able to do the following:
We have also provided an investment checklist document that you should fill out for yourself as you progress through the book. You can get a downloadable PDF version.6
First, we're going to cover some very practical personal finance foundations that will help you to think about how you allocate your money in life. This is all the essential, not-so-exciting stuff that forms the backbone to healthy finances. We'll be covering:
In Part II, we start drilling into investments but we're more interested in helping you understand the why and how of investing here, rather than the what. We cover:
In Part...
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