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Islamic Finance

In Islam, wealth is not only a means to survival but a trust (Amanah).

The Holy scripture reminds us to spend wisely, to avoid extravagance, and to protect ourselves and our families from harm. Historically, Muslims rode this balance naturally because the money itself encouraged it: gold dinars and silver dirhams carried intrinsic value.

Today’s fiat currencies behave differently. They depreciate silently under inflation, eroding our savings year by year. Across Europe, the Gulf, Southeast Asia and Africa, the same frustrations recur: a month’s salary buys less each year, foreign fees quietly tax cross-border families, and young entrepreneurs from Lagos to London, Jeddah to Jakarta ask why the tools in their pockets can’t help them build wealth.

The conventional card problem
The conventional debit card is a symbol of this disconnect. It is built for convenience, not for preservation. At best you receive a small cash back, while most of the value generated by your transactions flows to issuers and intermediaries.

For Muslims, there is another layer of unease. Many savings and credit products hinge on interest (Riba), something we are commanded to avoid. This often forces a compromise: use what is convenient today, even if it chips away at tomorrow.

Shifting sands
New experiments suggest other possibilities. In the UK, some fintechs permit balances to earn yield until the second you spend. In Bahrain and the UAE, regulators have begun licensing cards that link digital assets to everyday payments. In Nigeria, where currency instability is a daily reality, families use stablecoins as a store of value, though they still struggle to translate that into rent or groceries.

What these efforts share is a recognition that people are not only spenders or savers. They are both, and they want tools that respect their values as much as their convenience.

A community-first philosophy
The more profound shift is philosophical. Islam teaches us that wealth should circulate fairly and benefit the community, not just accumulate for the few. Finance, then, can be seen as a cooperative act.

Every purchase generates value: in fees, in data, in merchant relationships. Under the current system, that value is captured by companies. In a community-first model, it could flow back to members: into their savings, into mutual protection, into their neighbor’s small business.

Some associations are already exploring this path. At The LifeDAO, for instance, our community has been experimenting with cooperative models of finance. As part of that work, a debit card is being developed that shares surplus with members and keeps funds productive until the point of spending.

It is a singular example, but it illustrates how modern tools can echo our historical practices: money that grows while it moves, in service of the community.

Why it matters for Muslims today
For policymakers in the GCC and Southeast Asia, such approaches align with ambitions to promote financial inclusion and Shariah-compliant innovation.

For African markets, where currency volatility undermines family safety, the ability to hold value in stable instruments and spend locally is more than convenience; it is protection.

For Muslims everywhere, the stakes are higher than convenience. Ethical finance is not a niche preference but a principle of faith. To avoid Riba, to protect wealth from erosion, to ensure surplus benefits many rather than few, these are not just economic goals, but spiritual ones.

Rethinking everyday finance
Skeptics will rightly point to risk. Any tool that blends payments and growth must meet a high bar: strong compliance, plain-English disclosures, and careful asset choices. Community ownership is not a license for carelessness; it is a call to be more disciplined.

Education matters, but so does design. Systems that separate utility from growth leave people living paycheck to paycheck. Systems that integrate them allow even a cup of coffee to, in a small way, make you richer, just as holding a gold coin once did.

Some attempts are already underway. Many more are needed. What matters is that we stop accepting the false divide between spending and building. Our financial tools should help us do both quietly, ethically, and in line with the trust we hold as Muslims.

Sharene Lee is the chief operating officer & co-founder at Takadao

29 Sep 2025

Opinion

Islamic Finance

Reclaiming moral responsibility in commerce and work

“Don’t cheat God.”

These words rang in my ears as I recently sat in a class with the eminent Shaikh Muhammad Akram Nadwi, where we studied the hadith in the Book of Tricks (Legal Stratagems) in Sahih Al-Bukhari, and helped me sum up what I wish to convey in this article.

In reality, the words business and duty aren’t juxtaposed in our minds. Commerce and business, as we know them today, are mostly about opportunity, profit and arbitrage, and rarely, if ever, about duty.

Putting aside the fact that Imam Al-Bukhari saw the need to address tricks only some 200 years after the Hijrah, reflecting his concerns over the state of morality among Muslims in those early days, the common assumption today is: business is value-neutral as long as it is legal and profitable.

Our belief, however, stands at variance with this notion. As Muslims we are slaves of God, and all our actions carry significance. Islam’s world view teaches us that business is a moral activity that places one under legal and ethical responsibility before God.

In this article, we examine the core Islamic concept of taklif (responsibility/obligation) and its significance to our business endeavors, building on previous articles where we covered the subjects of morality and rights in business and commerce.

Business is not neutral

Taklif, in our tradition, implies conscious agency, freedom, and accountability under God. It is the moral and legal responsibility placed upon human beings.

A Muslim who is mature, sane, and informed is subject to taklīf and is called mukallaf. Taklīf grounds commercial life, helping guide investments with the spirit of service. It demands integrity and accountability, and ensures that self-interest is kept in check at all times.

God says in the Holy book that He does not burden any soul with more than it can bear, from which we conclude that God’s expectations are just and entirely possible, or else such a judging mechanism would not have been pronounced. And because we know that even an atom’s weight of good or evil is recorded, all actions are morally significant.

Business as a service
Businesses exist to serve. Serving is not a marketing tactic, but a moral commitment that is embedded in Islamic norms: sincerity (ikhlāṣ), trust (amānah), and goodwill (iḥsān). This is how taklif manifests between businesses and their stakeholders - the direct and the indirect ones.

For customers it's about offering a legitimate product with quality and integrity. For suppliers, taklif indicates fair pricing, payment terms and transparency in agreements. And for society as a whole, businesses must provide legitimate, beneficial goods and services that improve lives, solve problems, or uplift communities.

Creating and maintaining just employment opportunities and avoiding types of harm (darar) like polluting, misleading advertising, compulsive product design, and/or social destabilization are other examples of how taklif, among other things, must be carried out.

Taklīf case studies in a commercial context
If taklif denotes our moral and legal responsibility before God, then it can be understood perhaps as a framework through which His rights are mandated upon us.

Fulfilling those rights (Ḥuqūq Allāh) such as prayer, fasting, avoiding interest, Zakāh and truthful dealings) is part of fulfilling taklīf.

How do we understand taklif in business? It enjoins accountability in our professional realms, making us answerable to God for our commercial and professional actions. That’s right. In addition to your customers and suppliers, God has rights in our business.

These include systemic concerns (e.g., prohibition of usury, justice in transactions) that one must uphold even when no other human is directly harmed. Legal minimalism can not work, not least, if any stakeholder is at risk of being adversely affected.

Therefore, taklīf is not a public relations complication or a mere compliance add-on — it is essential to Muslim identity. Let’s look at some examples of how taklif might manifest for various actors.

Entrepreneurs and founders are the first mukallaf of their business. They are morally accountable for the structure, financing, ethics, and impact of the businesses they create.

Their decisions affect the entire DNA of the enterprise - so their duty to uphold Ḥuqūq Allāh is heightened. They must choose a business model that doesn’t exploit consumers or workers, even if other models scale faster.

They must build compliance into the core ensuring Shariah/ethical/legal standards aren’t afterthoughts but part of the original blueprint. They must prioritize purpose over exit, resisting the temptation which would dictate them to scale fast for acquisition, potentially shadowing the duty to build something morally upright.

And they should avoid impermissible startup investment (e.g. interest-based loans) even if it’s harder to raise capital because taklīf binds the entrepreneur to seek halal financing.

Maintaining a mechanism for finding and solving issues is also a critical part of ethically managing a business.

Corporate officers and board members are morally liable even when legally protected. Even with what is understood as limited legal liability, officers and directors remain morally mukallaf. Their taklīf includes strategic decisions that affect shareholders, employees, and the public.

They must facilitate ethical strategy. For example, approving a merger that will lay off hundreds may be legal - but if alternatives exist, taklīf demands exploration of just outcomes. Setting bonuses that widen inequality or reward short-termism violates the spirit of amānah (trust) under taklīf.

Greenwashing or sidestepping sustainability obligations to boost quarterly results breaches Ḥuqūq Allāh - even if ESG disclosures pass. Withholding material risk from shareholders or the public - even if legally allowed - breaks moral responsibility to truth (ṣidq).

Shariah scholars and advisors, as custodians of our tradition, are responsible to God before any and all other considerations. In fact, when it comes to our Deen (worldview and way of life), we are to ask them when we do not know.

So do they avoid/neglect flagging a transaction that falls afoul of our moral and legal standards? Do they not need to call out a transaction structure that fails to deliver equitably to all stakeholders? What should they do when a company they advise might be misleading customers with false advertising or putting short-term profits ahead of long-term value creation?

Managers and employees should be on the lookout for any business practice that transgresses the rights of stakeholders. These should be documented sincerely and addressed through appropriate channels - internal and, if necessary, external.

The charity fallacy and institutional responsibility
It’s critical to point out that our discussion is not limited to individuals. In fact, taklif extends to institutions as well.

In short, limited liability does not equal limited responsibility. As the owners and managers of companies, entrepreneurs must act on behalf of their companies, and invest in them responsibly.

Therefore, one can not misuse an enterprise to conduct activities that transgress the rights of God and human beings and later dilute the effect through purification of personal wealth accrued through questionable activities..

The common belief is: “Let’s accumulate wealth, and I’ll donate later.” Islam does not allow an ‘ends justify the means’ approach. Money made through questionable means should not be sanctified through charity.

In short, building ethics into business from the beginning is better than post-hoc purification. As the Prophet (PBUH) teaches us, “Allah is pure and accepts only what is pure.” (Ṣaḥīḥ Muslim)

Exercising restraint and discipline
The Prophet (PBUH) taught us the following supplication when we are to enter a marketplace.

“There is no God but Allah alone, without partner. His is the dominion and His is the praise. He gives life and causes death, and He is Living and does not die. In His hand is all good, and He is over all things powerful.”

We are taught the supplication because the market is a moral battleground, a space where we are inundated with desires revolving around wealth, status, competition, and shortcuts.

The duʿā’ begins by reminding us that God owns everything, and that our transactions are not just financial acts but moral choices under His watch.

The duʿā’ also counters the heedlessness that commerce can induce and reminds the trader or buyer that success is from God, and that life, death, and sustenance are His domain exclusively.

Sajjad Chowdhry is an entrepreneur and C-level executive with over two decades of global experience across venture building, strategy, investment, and strategic finance. A Columbia and Hartford Seminary graduate, he is also a co-founder of DinarStandard

24 Sep 2025

Opinion

Islamic Finance

Rethinking life insurance for the modern Muslim

Many people believe that life insurance is haram because they assume it involves riba (interest), gharar (uncertainty), and maysir (gambling) - all of which are prohibited in Islam.

But before we rush to dismiss the concept entirely, let’s pause and ask a deeper question: Is there a way for Muslims to ensure their loved ones are cared for, even after they’ve passed away?

Dispelling misconceptions
For many Muslims, life insurance feels like a Western product tainted by practices that clash with Islamic ethics. And to be fair, traditional life insurance - particularly in its commercial form - does raise some valid concerns. The involvement of interest-bearing investments and uncertainty about payouts makes most life insurance haram for Muslims.

But here’s the catch: life insurance, at its core, isn’t about gambling or exploiting people’s misfortunes. It’s about ensuring that, after you’re gone, your dependents are taken care of. The question isn’t whether the concept of life insurance is problematic - it’s how we can structure it so it adheres to Islamic principles.

Financial protection principle as old as Islam

Think life insurance is too modern to even become Shariah-compliant? Think again. Mutual financial protection is not new to Islam.

In fact, in early Muslim communities there were systems in place to help people manage financial burdens after an unexpected death. A key example is the Aqilah system, developed during the time of the Prophet Muhammad (peace be upon him). This system allowed tribe members to collectively contribute and pay diyyah (blood money) in cases of accidental death, thus protecting families from financial ruin.

The Aqilah system is rooted in solidarity and cooperation - values that are also central to the concept of life insurance. Much like the Aqilah system pooled resources for collective protection, life insurance, when structured ethically, aims to ensure financial security for families facing loss.

Islamic mandate to protect families

Islam places a strong emphasis on family protection, both financially and otherwise.

The Prophet Muhammad (peace be upon him) said, “It is better for you to leave your inheritors wealthy than to leave them poor, begging from others” (Sahih al-Bukhari).

This hadith underscores the obligation of Nafaqah, or providing for one’s dependents, even after death.

This goes to show that planning for the well-being of our families isn’t just a modern concern; it’s rooted in Islamic responsibility. Just as we prepare for the afterlife through good deeds, we are encouraged to plan for our families’ futures in this life. And life insurance, when structured to avoid riba and gharar, becomes a viable way to fulfill this obligation.

The heart of the issue often lies in misunderstanding what life insurance is designed to achieve. At its core, life insurance is about ta’awun, or mutual protection, a value that aligns perfectly with Islamic ethics. It’s not about profiting from death, nor is it about taking unnecessary risks. In fact, life insurance is a way of pooling resources to protect dependents, ensuring that they don’t fall into financial hardship in the event of a loved one’s passing. This communal approach mirrors the Aqilah system, where the goal was to share the burden and alleviate the strain on individuals or families in need.

Why Muslims must reconsider life insurance

The controversy surrounding life insurance within the Muslim community is largely tied to its association with Western financial systems. When structured correctly - according to Islamic values - life insurance allows Muslims to uphold their duties to their families even after they’re gone.

While traditional life insurance models do involve elements that are haram, the core idea behind it - providing for your loved ones in case of death - is deeply aligned with Islamic principles. By looking at historical precedents like the Aqilah system, we can reframe life insurance as an extension of mutual support and responsibility.

In a world where sudden loss can leave families financially vulnerable, it’s crucial for Muslims to think about how best to protect their loved ones. A Shariah-compliant approach to life insurance, built on ta’awun and maslahah, ensures we fulfill our obligations while also safeguarding the financial well-being of those we care about most.

Sharene Lee is chief operating officer and Ameerah Langer is brand & communications head at Takadao

23 Sep 2024

Opinion

Islamic Finance

Shariah-compliant response to conventional insurance: How Takaful offers a solution

Islamic finance is built on a foundation that contrasts sharply with conventional financial systems.

Unlike the global financial system, which is deeply rooted in interest-based principles that often lead to inflationary pressures, Islamic finance is driven by the principles of wealth preservation and equitable growth through investments that share both risk and reward. By rejecting riba (interest), Islamic finance presents an alternative that could address the pressing social justice issues of our time, particularly the widening financial inequality.

At the heart of Islamic finance is a set of prohibitions, derived from Shariah law, that dictate what is impermissible.

These include the prohibition of Riba (interest), Gharar (uncertainty), and Maisir (gambling).These principles not only guide Islamic banking but also extend to Islamic insurance, or Takaful.

Understanding the Prohibitions

1. Riba (interest):
Riba, or interest, is the most well-known prohibition in Islamic finance. It refers to any guaranteed interest on loaned money, regardless of the form it takes - whether monetary or otherwise.

Conventional insurance companies typically invest customer premiums in interest-bearing financial instruments, thus violating the prohibition against riba.

Moreover, the very structure of conventional insurance can be seen as involving riba, while scholars highlight the insurance contract itself as including riba since a small sum of money (premiums) is exchanged for a large sum of money (claims payment). The excess amount of the claim payment over the premium is considered a form of riba.

2. Gharar (uncertainty):
Gharar refers to excessive uncertainty in commercial contracts, where the outcomes are ambiguous or unclear.

Conventional insurance often involves a significant degree of gharar because the benefits to the insured are not always well-defined. For example, in auto insurance, the payout depends on various factors, such as the extent of damage and the insurance company’s assessment, leading to uncertainty about what the insured will receive.

3. Maisir (gambling):
Conventional insurance can also be viewed as a form of gambling.

In a typical insurance contract, the insured pays premiums with the hope that they will receive a payout in the event of a claim. If no claim is made, the insurance company keeps the premiums, and the insured receives nothing.

This creates a zero-sum situation where either the insured or the insurer benefits at the other's expense, aligning the contract with the principles of gambling, which is strictly prohibited in Islam.

Why conventional insurance is not Shariah-compliant

Given these prohibitions, it is clear why conventional insurance is considered haram (forbidden) in Islam. The practice of conventional insurance violates the core principles of Islamic finance, leading many Muslims to believe that all forms of insurance are impermissible. However, this is a misconception.

Prophet Muhammad (PBUH) himself endorsed the concept of preparedness against known risks. This approach was further exemplified by the practice of Aqilah, where members of a tribe would contribute to a communal fund to support each other in times of need.

Thus, the prohibition is not against the concept of insurance per se, but rather against the way it is practiced in conventional systems, which incorporate elements of riba, gharar, and maisir.

The emergence of Takaful

In response to the challenges posed by conventional insurance, Islamic scholars have developed Takaful, a cooperative form of insurance that aligns with Shariah principles.

Takaful is rooted in the idea of mutual assistance, where participants contribute to a common pool to support each other in times of need. This model eliminates the issues of riba, gharar, and maisir by ensuring that the interests of all participants are aligned, and any surplus is redistributed among the members.

The potential for Takaful is enormous, not just within the Muslim world but globally, as it offers an ethical alternative to conventional insurance.

With the advent of blockchain technology, cryptocurrencies, and decentralized autonomous organizations (DAOs), there is now an unprecedented opportunity to create a truly transparent and cooperative insurance system based on Takaful principles. For example, blockchain technology presents a vital opportunity to advance Takaful by enhancing transparency and security, aligning perfectly with Shariah principles.

Its decentralized ledger reduces fraud through real-time, verifiable claim management and automation, cutting down on manual processes and administrative costs while improving efficiency (Khir & Said, 2020; Ibrahim et al., 2022).

Sharene Lee is the chief operating officer at Takadao

26 Aug 2024

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