screening, and the role of Shariah boards. Thus, a more demand-based, and lower hanging fruit may well be a ‘Hajj Fund,’ modelled along the lines of Malaysia’s Tabung Haji. Obviously, there are a number of issues to grapple with, such as diversified asset class exposure, access to Sukuk, or the Islamic money market, but the journey has to start somewhere. So why not start with an in-depth examination of Tabung Haji, with accompanying feasibility studies and market surveys? The Hajj is by now an expensive undertaking –and rising– and it needs to be approached methodically as part of a compliant financial planning programme.
between VC funding and Islamic finance in all the Islamic financial hubs of the world. However, the American Muslims are uniquely positioned to lead the Muslim world on Islamic VC as the foundational infrastructure, as well as the inherent culture, already exists in the US. We can have Muslim angel investors, venture capitalists and investment bankers, Muslim entrepreneurs, Muslim university professors all linked to VC, and almost all forms of VC funding are considered Shariahcompliant. Indeed, it must be noted that there are non-Muslims who espouse the essence of the ethics associated with Islamic finance and VC and are ready to support and lead
India and America
India, the world’s largest democracy with the second largest population of Muslims after Indonesia, and the USA, still the world’s largest economy and military super-power, both have something in common concerning Islamic finance. They both seem to hold a similar mixture of views such as: 1) issues surrounding the separation between religion and the State; 2) fear of the back-door creep of Shariah into the country that might erode established constitutional norms; and 3) financing extremism, and so on. One is reminded of the famous inaugural quote from President Franklin D. Roosevelt, ‘The only thing we have to fear is fear itself.’ The commonly heard arguments for Islamic finance in India and US include nonMuslim countries declaring themselves as Islamic finance hubs (such as the UK, France, Singapore, Hong Kong), high profile western financial institutions involved in Islamic finance (such as Citibank, Ernst & Young, Clifford Chance and Morgan Stanley), or western corporations, like General Electric, raising money via Sukuk, etc. However, while interesting, these activities do not seem to be persuasive for the politicians and regulators concerned, so it seems we still need to go back to the drawing board.
Conclusion
Connecting to business
In addition, it would be interesting to have some US-based Islamic financial institutions to sponsor programs like the equivalent of Dragon’s Den or Shark Tank, where aspiring entrepreneurs, such as Halal industry SMEs, can submit their ideas for funding. To some this might be partly a form of philanthropy, capital market style, and to others a slightly cheesy imitation of western TV programs, but it would be an interesting exercise to let the market decide by the subsequent investment successes or the TV ratings. Venture capital (VC) partnership financing is an excellent application of Islamic financial principles, where a company has not been tainted by conventional debt, non-operating interest income, and so on. Unfortunately, to date there is a disconnect the size of the Grand Canyon
this type of initiative. Obviously, the projects to be financed must be viable, demand-based and profitable. We need to approach this like capitalists but still act like missionaries. We would do well to look at some of the challenges and opportunities in the Muslim world: from obesity and diabeties in the GCC to alternative energy in SE Asia or healthcare in Africa. Where there is a problem, there is usually a viable business waiting to solve it. Thus, the US could actually become a hub for Islamic VC initiatives, and the benefits are many, such as: 1) educating and eradicating myths; 2) financial inclusion, as fund-raising activities could include crowd-funding approaches; 3) an attempt to address issues, such as technology transfer, in the Muslim world; and 4) establish a better foundation for US Islamic banking activities.
22 • HALALconnect | September 2012 | www.americanhalalassociation.org
Today, many American Muslims are encountering recurring bouts of ‘donor fatigue’ induced by the seemingly endless rounds of fundraising by domestic and foreign Islamic organisations. Communitybased initiatives in our capital constrained economic climate are equally strained. Our domestic challenges need homegrown solutions; overseas money has for too long just been providing ‘fish’, whereas what we really need is to learn how to fish-farm! The American Muslims have growing social empowerment and increasing political engagement. However, what we really need is sustainable financial empowerment. The few billion dollars of Islamic financial activity, be it mortgages or funds under management, is only a small beginning. The potential is hundreds of billions. Once we can extend the conversation to include other types of funds, from Zakat to Private Equity, from Halal food SME trade financing to compliant education financing, then we can open up a new horizon of activity and empowerment. Money may well be at the root of many evils, but it can also be a muscle with a moral purpose.