The Islamic Financial industry is one that’s often overlooked, despite the fact that it’s currently valued at $2 trillion and growing 15-20% each year. But why aren’t as many people aware of the promises it holds for the future? What has the Islamic Finance Group (IFG) at NYU done to overcome this issue?
Before delving into these questions, let’s answer this: What is Islamic Finance? One of the key principles is the prohibition of Riba, a term that translates to “increase or addition”. Essentially, any excess, unjustified gain is not permitted under Islamic Finance. It is often referred to as interest, which arises from the belief that banks should not exploit an individual’s need for funding or loans. Thus when they repay the loan, they only pay back the principal amount.
Islamic Finance also does not allow the accrual of interest because money is only a means of exchange and assigning a value to a commodity, so it does not have any intrinsic value. As a result, banks cannot benefit off of simply possessing money. Instead, they turn to investing and share risks of those investments with depositors. When profit is generated, it is once again shared with those individuals who place their money in the bank.
Due to risk sharing, involvement in transactions and investments that air in uncertainty (Gharar) are prohibited. All risks must be made explicit so that depositors’ funds are not jeopardized. Furthermore, investments must be in the real economy and they cannot be in gambling (Maysir), alcohol, tobacco or other illicit sectors.
Although the above does not cover the entirety of Islamic Finance, in essence it aims to promote transactions and relationships that are mutually beneficial and sustainable, where ethical practices bring about profit. Currently, the industry is growing fast in Malaysia, UAE, Bahrain and Oman, and all four countries (and more) have developed an environment for Islamic Finance to succeed.
Given the nature of the industry and its scope, Stern students Dena Samad (‘19), and Essma Bengabsia (‘18) founded the Islamic Finance Group (IFG) at NYU last year. IFG’s objective is to foster a group of students, faculty, and community members who want to explore Islamic Finance and engage in a conversation about its role in various markets.
Last Spring, IFG hosted a panel with Haute Hijab, their CEO Melanie Elturk, Co-founder and GOO Ahmed Zedan, and Zahra Aljabri, CEO and Founder of Mode-sty. In 2016, the modest fashion market size was at $254 billion, and it’s predicted to reach $373 billion by 2022. Macy’s launched the Verona Collection, its first ever modest fashion clothing line this February, which incorporates vibrant colors, various styles, and fashion-forward looks. It dispels the myth that modest fashion is shapeless, boring or dull. Moreover, the fact that a major department store in the United States took the initiative to introduce Islamic fashion into its stores highlights the effects of an expanding market. Without this panel organized by IFG, students at NYU might not have been exposed to this growing demand for modest clothing.
The Halal Guys Multi-Unit Franchisee, Sami Shaban, led a discussion on Islamic finance and entrepreneurship at IFG’s event, Halal Guys: From Street Cart to International Franchise last year. In Islam, entrepreneurship is highly encouraged, where success is not necessarily measured by revenue raised. Any venture must also abide by rules outlined within Islamic finance, and follow some other guidelines as well: avoid wastage of resources, finance the business through Islamic banks, ensure transparency is all transactions, and uphold principles of sincerity and honesty. The principles of Islamic entrepreneurship ensure the enterprise engages in efficient and ethical practices to ensure stable and low-risk growth.
This semester, IFG hosted Dr. Amjad Saqib, the founder and Executive Director of Akhuwat, the world’s largest interest-free microfinance program. Commercial banks usually charge interest and require collateral when anyone wants to take out a loan. However, interest-free microfinance eliminates the two obstacles the poor face when borrowing money: interest and collateral. With this concept, Dr. Saqib’s envisions “alleviat[ing] poverty by empowering socially and economically marginalized.” During the event, he mentioned the possibility of sustainability through interest-free loans and the way in which Akhuwat has helped the poor with starting their own businesses. This facet of Islamic finance proves how it can also be a tool for social impact.
Within a short period of time, IFG has introduced NYU to different things that comprise Islamic finance, an industry that many students, including myself, may not have had knowledge of to a great extent. As IFG is a Stern trial-club, it plays a key role in truly making our educational experience at NYU a global one.
Dena Samad, the current President of IFG, said she co-founded IFG because “If someone is willing to invest in me each year, I wanted to make sure I give back by leaving a legacy within this school. I saw a gap in our education and wanted to bring light to how business operate at a global scale to reflect NYU’s emphasis on global experiences, a source of pride for the university.”
Moreover, at NYU, there aren’t courses offered on Islamic finance. This is why the inception of IFG has been the first step to show NYU students all the opportunities available to them that are not within the conventional financial industry. Also considering what was published in the Washington Square News’ article “Racial Discrimination and Islamophobia Pervasive in Stern,” it shows that even though IFG exists, it is still only the first step.
Nonetheless, IFG has definitely shaped the way students view Muslims in the business world. Providing a platform to innovators and influencers to share their stories shows us the way in which Muslims can be visionary and realize their aspirations – a way that Muslims are not often portrayed. IFG highlights the versatility of Islamic finance through its use in fashion, food carts and microfinance while giving a new face to the modern, Muslim leader.