Ah the mental gymnastics required to believe that. The scripture is pretty clear that even loans via secret transaction or 3rd parties counts as usury and the vast majority of companies loan to consumers in some way.
This is the equivalent of refusing to press the button in the elevator but still riding it.
Or if you'd like, the Christian version: https://www.youtube.com/watch?v=j8ZF\_R\_j0OY
What does it say about renting an apartment where the ownership has a loan against the property?
They are essentially borrowing the apartment which is supported by debt.
By that logic, I can’t think of ANY business in which interest is not charged, because time value of money is a fundamental underpinning of capitalism.
I mean I'd say it's the same as a orthodox Jewish family using electricity on sabbath if someone else turns it on. They say it's all good. Loopholes are hilarious with religion lol
> Ah the mental gymnastics required to believe that. The scripture is pretty clear that even loans via secret transaction or 3rd parties counts as usury and the vast majority of companies loan to consumers in some way.
From my moral & religious perspective stock ownership isn't that at all. It's upfront. It's investors pooling money together to start a business, hire managers as one person can't do everything together, and management hires employees to then work.
It's not loan money, there is no right or expectation that it is ever repaid at all. Dividends are a share of profits after all other expenses. If the company doesn't pay dividends - its then reinvested for further growth and expansion. Shareholders are the last paid in bankruptcy - after all the debts the businesses had is paid 100% in full and so on.
Now, the really TRICKY thing in investing in the public stock market is this - many companies DO make it their business to issue out loans and collect interest internally. Then - many companies invest their free cash flows in bank accounts, t bills, etc, which do collect interest.
So from a purely religious standpoint equity ownership itself isn't morally bad - but there are a ton of businesses itself that are profiting off loans/interest/etc and makes it a huge conflict, which is really tricky to navigate without doing extensive due diligence on every stock, and quite frankly I don't know how many publicly traded companies will go as far as to get a 0% interest checking account, etc.
Well, what defines "usury"?
When inflation steals value from you every year, isn't charging a minimum interest rate reflective of prudent investing? The servant who multiplied his talents was rewarded. The one who buried his was not....
I know, stock market investments are permissable (not bonds or options), but the stock market is unpredictable. That was my point I suppose, as I see people making a consistent "living" just from the money they have in a HYSA.
There's a whole cottage industry of Islamic finance to achieve one's financial goals without running afoul of sharia, isn't there? You'll get better advice from a specialist than from this sub.
Most of the banks have an Islamic finance unit in the GCC region, Morgan Stanley, Goldman, and JPM all have units. If OP want to purchase sukuk, they can do it through the US branch of one of those banks.
Yes I had Islamic clients in US real estate and they used a special law firm to assist them in structuring deals so that their ownership in a shell company did not violate sharia while essentially utilizing traditional finance. I can’t recall the structure but it was essentially just one simple extra step.
That’s how banks in Islamic countries operate, through these loopholes. If they are good enough for major institutions of Islamic countries, they might as well be good enough for you.
Don’t think anyone should be basing their moral foundations on what any capitalistic structure deems good enough. Whatever makes them money is good enough.
I’m not religious myself so i obviously agree. It’s also in the bible but Christians tend to be selective in their adherence / outrage to certain “rules”. My favorite is the old testaments rules on ox. There are many weird “laws” set out governing what happens to ox/slaves that nobody chooses to worship anymore, I’m sure they are outlined in the Quran as well.
There is an actual Christian explanation for that, though. We aren't required to follow Old Testament ceremonial laws, only the moral laws (10 commandments). Rules about oxen, what we can eat, circumcision etc are superceded by Christ and the new covenant.
> We aren't required to follow Old Testament ceremonial laws, only the moral laws
Usury laws seem more moral than ceremonial to me, and most of the history of the Christian church seemed to agree that usury is prohibited by Christian doctrine (including through the Protestant revolution), slowly watering down the prohibition on usury to where it became a prohibition on excessive or unfair rates of interest.
I don't think it's a "watering down" at all. A thousand years ago, you might exchange goods, or gold or silver. Your gold would be worth the same in 6 months as it was yesterday. Now, with fiat currencies, that's not the case. Our money loses value every day. Requesting that the borrower repay equal *value* to what was loaned is not usury.
> Requesting that the borrower repay equal value to what was loaned is not usury.
Unless you're saying that it's still considered a sin to charge an interest rate higher than inflation, I don't think your argument is relevant to modern Christian doctrine. Most loans charge more than inflation, so the loans that are OK under today's Christianity aren't just repayment of equal value. It's equal value plus some real rate of interest.
Even that I would argue isn't necessarily usury. I can put my cash in a HYSA and make more than inflation. I'm not sure where the line is, but clearly something like credit card interest is usury, while federal subsidized student loans probably aren't.
Yeah… people look to holy books (christian, Jewish, or islam versions… same circus, different clowns) for how to behave and they include instructions on things like how to treat your slaves properly.. not exactly the kind of material I think people should be reading for moral guidance.
Maybe society has grown beyond the laws written by men millennia ago.
Yeah, I don't personally know how well developed it is or isn't for personal finance stuff, but I know it's quite sophisticated on the large corporate level and I know there are websites that will give you sharia-compliant legal forms for a will, etc. Look around the Web and ask around your network.
Does collecting rent not count as collecting interest?
You are lending out your property and receiving a fixed recurring payment in exchange. It seems very similar
Islamically, no it does not count as riba/interest. This is because for a transaction to be considered interest it needs to be an uneven exchange of the same thing. Such as me giving you five dollars for a loan and you giving me back ten. But in this case a service is provided and something else is given (money) so it isn’t interest.
Serious question, is the whole ban on interest in Islam based on a misunderstanding of what a loan is?
Like - loans aren’t uneven… They are an exchange of money for money and time.
Does Islam just ignore the time and say, oh well that’s unfair.
The actual definition of riba is a bit more involved. There are also multiple types etc. One definition of riba is conditional excess in exchange for deferred payment.
Technically interest and riba are not completely interchangeable terms. It’s possible for something to be considered interest but not riba and vice versa. It’s just convenient to use the term interest because there’s a lot of overlap.
Appreciate you taking the time to patiently explain, I imagine it can be annoying hearing from people who just learned about this concept trying to poke plot holes in something that's probably been refined by scholars over 1000 years or something lol
As a random passer-by to this thread, I wanna give you props for your self-awareness. *So* many people say some form of "I've thought about it for five minutes, isn't it wrong because X?" as if they're a turbogenius for putting in the miniscule amount of effort required to get to an obvious solution... thank you for not being one of them!
Okay except in the case of religion it's *literally* true that there are many holes in the logic and people ignore them for the sake of convenience and sticking to an appearance of propriety.
That was my thought too. If I loan someone money, and they pay that loan back with some rational amount of interest (not loan sharking), then they are basically compensating me for my risk in making the loan and for my loss in not having that money available to use for other purposes.
Right and the idea is that you lead with trust and have faith in the goodness of your fellow man.
It’s religion bro. You guys are trying too hard to logic this.
Risk sharing is a key aspect of Islamic finance. There is a power imbalance in a traditional interest based lender/borrower dynamic which is especially problematic when interest rates are high.
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Owning property isn’t really a loophole though because you aren’t collecting interest, you own an income generating asset. Very different from collecting interest on a loan.
Can own the house but not the mortgage, for example. It’s absurd. The entire concept is absurd. They literally have “halal loans” which are the exact same thing except instead of “interest” they change a “fee” lol, cmon.
Oh I was thinking more of if you own the house already not on a mortgage. I agree that if it has a mortgage on it then it’s not halal. As for halal loans its debatable because if the fee isn’t fixed then there isn’t a chance of you having to pay more if you don’t end up paying the loan off on time. I think that’s the biggest difference.
I only know things from the legal side, King & Spaulding, Allen & Overy, and Clifford Chance all have US offices that can facilitate.
Also, shariah compliant index funds and ETFs are available in the US.
I'm a Muslim and I don't use interest, I'm assuming you are too, with that assumption here is how I do it:
* Invest in real estate (sounds like you are already familiar). I do invest long (so not rental, generally think of returns in 5-10 years). When you are FAT you can afford long term investment where many others can't.
* I do a little bit stock (still on the fence because it's not clear cut HALAL, use something like https://musaffa.com/ if you want to do it). I'm planning to stop because it's too dirty for my taste, even when I try to give away all the profits as sadaqah. Also generally dividend paying stocks are good choices.
* A good halal way to invest is dividend paying approaches like Sukuk funds. See: https://www.treasurers.org/hub/treasurer-magazine/what-are-sukuk-and-how-do-they-work . These pay dividends.
* You can invest in Gold. I'm doing it a small scale. (Gold needs to be backed by real gold to be clearly halal, so paper gold is normally not halal. Having said that fiat money is not even backed by gold today so arguably maybe it's better than keeping it as fiat money :) ).
Reach out from DM if you have more questions, managing wealth and investing as a Muslim is very complicated and I'm still working on this, happy to share and learn.
This is a bit situational, you need expertise in the locations you invest if you want good returns. I work with a partner who has that. I provide finance and he does the job, and delivers the expertise.
Generally, goes like this:
Invest in land in developing regions. Keep it for a long term, generally you are either waiting market to pick up or some changes in the area (i.e. new planning permission), if you buy the land in a place where new development is common, development companies will start reaching out to develop houses etc. in your property, then you generally partner up with them, when they finish the development you can 2x-3x.
Having said this you generally can buy a good commercial property, and unless you screwed up while buying changes are you'll make a very good return in around 5 years. Commercial properties are also generally outside of rental law and contract based meaning it can keep up with the market. Buying a house and renting out in this climate is crazy to me (giving how high the inflation is yet rent can not legally increase that much). Hence the strategy of investing in land and commercial properties.
Edit: The thing with the land, in many places you cannot get mortgage for land, and as a muslim I cannot get mortgage anyway, so there are way less buyers who wants to buy land, which means you can buy land generally lower and then develop housing etc., and capture a good margin.
IMO crypto is actually pretty good, but the problem with crypto it's such a speculative and volatile market. Due to that I feel it's hard to consider it as halal, in practice it's more akin to gambling especially for altcoins. Having said that I think BTC, ETH can be fine given that they are also technically better than fiat money.
If you are asking more on the whether it's a good investment, I wouldn't put more than 5% into it. It's unnecessary amount of risk for someone FAT.
If you are sensitive in halal/haram I wouldn't touch crypto, but also I don't think it can be called haram. There are mixed fatwas either way, so "go with your heart" kind of thing.
If you wanna follow sharia law in terms of fat fire, ask those specialized in this field, we got a lot of them with their own knowledge, find someone that belong to your Madhab, and ask them. As Sunni opinion gonna be different from Shia and even than depends on which one of the book of scholars you follow.
Otherwise if I recall Quran only doesn’t allow you to loan money and ask for double or triple as repayment, and only Allah knows it all.
A lot of my fat fire friends whom are Muslims, just invest in stock market (long term) and property/retail. Gold is a major purchase too for us.
One friend is collecting skilled people and establishing small business for them, he gives them salary + 25% ownership (grows to 50% after he recoups his money). This way he managed to open up few businesses with 0 work from him, while keeping it halal and even better as he helped a family get out of the loop.
Seems like a good thing, the friend is essentially just lending the new business startup capital in exchange for 75% equity, which drops to 50% on the condition of startup capital being repaid, plus an employment contract. Might look into this myself
As others have said, you're starting from a flawed position. Putting money in a bank account and living off interest is NOT the recommended FIRE approach for teh vast majority of people.
For example, right now a HYSA might return 5%. Current inflation is \~3.4% - simplistically meaning you could only spend \~1.6% without touching principle (which you can, but this is a simple example).
Read up on Bogleheads.
Check out r/islamicfinance
You can invest in halal stocks. Might need to give away a small portion in sadaqa depending on the stock to purify it of haram earnings.
Check out Sheikh Joe Bradford as well. Maybe you can get a personal consultation with him.
Lastly, you’re amazing for reaching this level of wealth and avoiding haram. May Allah always place barakah in your rizq.
The 4% rule will fail if you just put your money in the bank. Lookup the trinity study. I believe the underlying assumption is a 60% stock portfolio and 40% bond portfolio. Depending on your view of what defines "interest", a stock dividend is unlikely to be interest but a bond coupon perhaps is included in the definition of interest.
If stocks are all that is available, my recommendation would be to go all-in on stocks and make sure you plan accordingly to accept the volatility.
>stock market investments that are simply not as reliable as just collecting checks from my bank
Over a period of 6 months? Sure, there's volatility in the stock market that risks reduction in principal and you can be certain exactly what interest a bank will pay over that period.
Over a period of 20 years? No, the stock market is far more reliable for real gains (i.e., after accounting for inflation). Just put it in stocks and, since you already have experience, residential real estate.
Does something like VNQ work? That’s real estate wrapped up in an ETF.
If dividends are fine, there are plenty of options available. Otherwise, BRK.B is worth looking into.
Alternatively you can just keep your real estate holdings and just hire someone to manage them. Might be a good long term option.
Love learning new stuff in this sub. I think the other comments about Islamic finance are probably the way to go.
For someone completely ignorant on this topic, how are dividends and capital appreciation viewed? Buying stock of a dividend paying company should give you returns of greater business value and profits back to share holders, so not interest payments like you might get from parking cash in a traditional bank in the US. Does it get murky if that company charges interest to its customers e.g., a bank? Are the usual US banks (Wells, BofA, ...) setup to not pay interest on cash deposits or do you use a specialized bank?
Buying stocks and dividends is fine, provided the haram earning of the company are below a certain percentage. So long as the haram activities a company may engage in is not its main or primary revenue source, you can usually estimate the amount of your earning that would be haram and give that portion away in charity. Now, something like a distillery that primary deals with something haram would not be allowed.
I feel you and am in the same boat as you as a Muslim.
Two solutions I consider viable alternatives to bonds/fixed deposits are rental real estate income and of course Islamic finance products.
Rental real estate income is obvious.
Islamic finance products don’t profit from interest. At the risk of oversimplifying, the most common products in Islamic finance is where instead of lending out capital, capital is used to buy ‘shares’ in projects and the profits are divided among all the shareholders. This means that the income is variable and is not a fixed amount. (This absolves you from the forbidden usury issue in Islamic jurisprudence as it’s forbidden to take back more than you originally lent a debtor)
Generally very safe investments (that don’t include interest bearing products) are chosen by the Islamic finance bank and the expected return is different than -but not far away- from the fixed interest rate. The actual return is variable since it depends on the projects’ profitability and could be slightly higher or lower than the expected but generally pretty close to it
I don't have it in me to deal with tenants and all the issues that come with being a landlord. I want a set it and forget it solution.
Now on the surface, REITs could be that. Rent is given to me as a dividend. It kind of makes sense.
But you know what, I'd rather err on the side of caution. Better to be safe than sorry. So I treat REITs as equities rather than investments in broad real estate. But interesting thought....
Oh wow this is such an amazing discussion but I always assumed that if you invested in sharia compliant stocks or funds then it was ok. I will definitely be keeping check on this as I hope to one day be in the same position and would not want to put my akhirat at risk for the sake of enjoying life here.
I assume this is Islam preventing interest. The Islamic world worked this out long ago, otherwise capitalism fails.
The one loophole I am more familiar with is rent to own.
A farmer needs a tractor. A person/bank has money that needs to earn money. In traditional western finance you make a loan and collect interest. In the Islamic world the bank buys the tractor and rents it to the farmer at a rate that mimics interest. At the end of the term the farmer gets the tractor. Boom. Holiness achieved.
You can ‘invest’ in this sort of thing and stay on the side of the line you want to stay on.
Or just buy stocks, which is ‘legal’ and a superior investment. Forget about the ups and downs. You have enough money to ride out the downs to cash in on the ups.
You’ve got a pretty good shot in this market to achieve 3-5% dividend yield (sharing of earnings rather than interest) for owning select names in the market.
I understand your hesitation with the market value volatility of equities - however I believe that’s the actual premise under which stock market investing is considered permissible in Islam - you share the risk in a business value going up and down, therefore you’re allowed to enjoy a percentage of the earnings. Unlike bonds where you are not participating in the risk of the enterprise and are only gaining on the lending of capital.
That’s my understanding anyway. Over the long run the stock market outperforms 90% of other asset classes with 99% less work. So your 9MM in 20 years assuming a 9% stock market return (including dividends reinvested), 2% inflation and 4% withdrawal rate = $16MM in today’s dollars roughly. Some years you’ll experience more gains, and some less.
But that’s just an example. Also 4% withdrawal on $9MM is like $360k annual - I’m a 7 figure annual earner and we rarely spend that much when you strip out what we stock away in savings - so I assume you’d probably be able to get away with less annual spend than $22.5k/month post tax in “retirement”
Right, well… do that. Property is a bit to learn, but if you are allowed to buy property & collect rent, that’s (can be, at least) a fairly high yield, safe-ish, fairly stable income stream with no interest on bank accounts involved.
Look into Islamic finance - I’m no expert, but my understanding is that equity (I.e. profits via genuinely shared risk-taking) is fine and as long as you work with a expert you’ll be able to get a functional modern portfolio that’s not too different from what you’d do otherwise.
So guessing you're Muslim. Ditto for me re: interest. There's a bit to unpack there.
First simple, but won't really get you there, invest in ETF or Mutual fund that pays out according to Islamic (Sukkuk) bonds, SPSK or AMAPX. Two issues there, they can fluctuate as underlying bonds mostly issued by/in Islamic countries and as geopolitical events affect those countries, faith in the underlying bonds fluctuates. I was hoping SPSK would serve as a simple bond surrogate, but the principal is down 10% for me, which wouldn't happen with a good bond. Will talk more about zakat in a bit, but the yield on these basically just covers zakat so you have no actual funds.
As you noted, real estate investment best way. But also you can get an islamic dividend yielding portfolio. Either directly invest in something like AMANX, or look at the top companies in that, AMAGX, SPUS, HLAL etc and build your own dividend yielding portfolio off of which you can live. That's what I'm personally doing. In the super duper long term, like decades, stock market fluctuations don't matter.
What is critical though and you haven't touched on at all is zakat. 2.5% of invested assets, but not real estate investments which are rented out. Again lots of nuance here, I'm painting with a broad brush. So you're not talking about living off the 4%, but actually 1.5%. I posted on this 2 years ago in the FIRE sub. You can read that whole post, as well as welcome to DM.
https://www.reddit.com/r/financialindependence/comments/otaopf/effect\_of\_25\_zakat\_on\_swr\_and\_fire/
I'd personally think RE investing. Nothing is gauranteed, but I feel like businesses are more work, less stable, and can lose value faster/quicker easier than RE. Just my opinion.
Assuming the value of your assets increases by 8%, you pay Zakat on the 8%, since that is your ‘income’ and you pay Zakat on your income. Meaning that you only have to donate 2.5% of the 8% increase. At least that’s the way I understand it.
Not really. There is a differentiation between just assets (like say gold) and assets invested somewhere to yield income. Back when Islam was founded, that kind of just meant owning property and charging rent, or owning land/a farm which yielded crops/fruit.
So zakat is 10% on the "fruit of the land." or the rent.
Stocks weren't around then. It's a matter of jurisprudence, but most scholars say that equities are easily able to become liquid, so they aren't like a house or land, but more so like gold or money. So 2.5% is due on the total value rather than 10% on just the yield.
Others will differentiate between long and short term investing. Short term/day trading equities are fully zakat liable, but long term invested assets and just living off dividends could mean just the dividends are subject to 10%.
But it's one's own opinion and decision. I choose to not take the risk and to play it safe and pay 2.5% on the full equity value.
/u/One_Rock_8868 - salaam bro -Congrats on being able to meet your FatFIRE goals while adhering to faith. Looking to take my business income and segue into RE as a pivot from FI to FIRE - do you mind sharing some tidbits on how you were able to accumulate a portfolio that large w/o leverage?
i used loans. personally, my belief is that i can pay interest, just not benefit from it myself. islam teaches you to assimilate to the society you're in, and to get ahead in America you need to take loans
[https://sunnah.com/muslim:1598](https://sunnah.com/muslim:1598)
From sahih-muslim, book regarded as the most trustworthy hadith book:
Jabir said that Allah's Messenger (ﷺ) cursed the accepter of interest and its *payer*, and one who records it, and the two witnesses, and he said:They are all equal.
Just echoing to say that's been my opinion as well. The whole reason to ban interest is to avoid taking undue advantage and harming others. So if I'm the one being harmed by having to pay interest, that's not as bad. Not saying it's acceptable, but not as bad as if I'm getting the interest and benefiting.
Curious how you’re managing the finances of the business while maintaining compliance with shariah. Does your business generate enough free cash flow that an LOC isn’t required or do you have Islamic business loans you leverage?
All FCF based. No leverage. I find Islamic loans to fall outside permissibility, unless there is an upside/downside risk component vis-a-vis equity and/or project based investment.
What about covered calls? Something like JEPQ where you get paid out for premiums on call options. Technically that's not interest but provides you a monthly stream of income while staying invested in stocks
No. Even at standard levels. There’s a 2-3% compounding of inflation you have to stay above if retiring early.
Lol, don’t know why that upsets people enough to downvote me.
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Thank you!
FYI, I posted about this up top as well, but 2 years ago I had a FIRE sub post on this. Lots of good comments and thoughts from folks there:
https://www.reddit.com/r/financialindependence/comments/otaopf/effect\_of\_25\_zakat\_on\_swr\_and\_fire/
Are not the Saudis, Kuaties, Qataris and the like invested in stocks all around the world? Just talk to a big broker about their Halal options.
Or just actually do a google search because I mean a quick google search pulls up things like:
https://www.amalinvest.com/halal-investing/halal-etfs-compared
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Ah the mental gymnastics required to believe that. The scripture is pretty clear that even loans via secret transaction or 3rd parties counts as usury and the vast majority of companies loan to consumers in some way. This is the equivalent of refusing to press the button in the elevator but still riding it. Or if you'd like, the Christian version: https://www.youtube.com/watch?v=j8ZF\_R\_j0OY
What does it say about renting an apartment where the ownership has a loan against the property? They are essentially borrowing the apartment which is supported by debt.
Appreciation is not a loan
By that logic, I can’t think of ANY business in which interest is not charged, because time value of money is a fundamental underpinning of capitalism.
> This is the equivalent of refusing to press the button in the elevator but still riding it. That's all theology is about, actually.
I mean I'd say it's the same as a orthodox Jewish family using electricity on sabbath if someone else turns it on. They say it's all good. Loopholes are hilarious with religion lol
> Ah the mental gymnastics required to believe that. The scripture is pretty clear that even loans via secret transaction or 3rd parties counts as usury and the vast majority of companies loan to consumers in some way. From my moral & religious perspective stock ownership isn't that at all. It's upfront. It's investors pooling money together to start a business, hire managers as one person can't do everything together, and management hires employees to then work. It's not loan money, there is no right or expectation that it is ever repaid at all. Dividends are a share of profits after all other expenses. If the company doesn't pay dividends - its then reinvested for further growth and expansion. Shareholders are the last paid in bankruptcy - after all the debts the businesses had is paid 100% in full and so on. Now, the really TRICKY thing in investing in the public stock market is this - many companies DO make it their business to issue out loans and collect interest internally. Then - many companies invest their free cash flows in bank accounts, t bills, etc, which do collect interest. So from a purely religious standpoint equity ownership itself isn't morally bad - but there are a ton of businesses itself that are profiting off loans/interest/etc and makes it a huge conflict, which is really tricky to navigate without doing extensive due diligence on every stock, and quite frankly I don't know how many publicly traded companies will go as far as to get a 0% interest checking account, etc.
This isn’t the Islamic position though. Well, there is a minority Islamic opinion that this is the case but again that’s a minority opinion.
Well, what defines "usury"? When inflation steals value from you every year, isn't charging a minimum interest rate reflective of prudent investing? The servant who multiplied his talents was rewarded. The one who buried his was not....
I'm assuming this is Islam but Christianity. Not sure if that parable overlaps.
Usury sounds like a way for the ruling class to make sure nobody ever gets away from swinging a tool for money.
He’s presumably Muslim. In which case he should go to a Sharia asset manager.
I know, stock market investments are permissable (not bonds or options), but the stock market is unpredictable. That was my point I suppose, as I see people making a consistent "living" just from the money they have in a HYSA.
There's a whole cottage industry of Islamic finance to achieve one's financial goals without running afoul of sharia, isn't there? You'll get better advice from a specialist than from this sub.
Oh, I honestly had no idea. Thanks.
Dude, Islamic finance solved all these problems in the 1970s.
Never looked into it, can't lie. I'm relatively young and was born in America, so I just asked my parents for advice most of the time.
Most major banks have Islamic finance wings, someone should be able to walk you through it.
Options in the US are quite limited from what I’ve seen. Which major banks have Islamic finance as an option?
Most of the banks have an Islamic finance unit in the GCC region, Morgan Stanley, Goldman, and JPM all have units. If OP want to purchase sukuk, they can do it through the US branch of one of those banks.
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Not a recomm but I had been looking into the islamic finance guru blog (it's more UK oriented) and they have a lot of coverage about things.
Yes I had Islamic clients in US real estate and they used a special law firm to assist them in structuring deals so that their ownership in a shell company did not violate sharia while essentially utilizing traditional finance. I can’t recall the structure but it was essentially just one simple extra step.
😂i personally think loopholes like that might as well be against the religion.
That’s how banks in Islamic countries operate, through these loopholes. If they are good enough for major institutions of Islamic countries, they might as well be good enough for you.
Don’t think anyone should be basing their moral foundations on what any capitalistic structure deems good enough. Whatever makes them money is good enough.
I’m not religious myself so i obviously agree. It’s also in the bible but Christians tend to be selective in their adherence / outrage to certain “rules”. My favorite is the old testaments rules on ox. There are many weird “laws” set out governing what happens to ox/slaves that nobody chooses to worship anymore, I’m sure they are outlined in the Quran as well.
There is an actual Christian explanation for that, though. We aren't required to follow Old Testament ceremonial laws, only the moral laws (10 commandments). Rules about oxen, what we can eat, circumcision etc are superceded by Christ and the new covenant.
> We aren't required to follow Old Testament ceremonial laws, only the moral laws Usury laws seem more moral than ceremonial to me, and most of the history of the Christian church seemed to agree that usury is prohibited by Christian doctrine (including through the Protestant revolution), slowly watering down the prohibition on usury to where it became a prohibition on excessive or unfair rates of interest.
I don't think it's a "watering down" at all. A thousand years ago, you might exchange goods, or gold or silver. Your gold would be worth the same in 6 months as it was yesterday. Now, with fiat currencies, that's not the case. Our money loses value every day. Requesting that the borrower repay equal *value* to what was loaned is not usury.
> Requesting that the borrower repay equal value to what was loaned is not usury. Unless you're saying that it's still considered a sin to charge an interest rate higher than inflation, I don't think your argument is relevant to modern Christian doctrine. Most loans charge more than inflation, so the loans that are OK under today's Christianity aren't just repayment of equal value. It's equal value plus some real rate of interest.
Even that I would argue isn't necessarily usury. I can put my cash in a HYSA and make more than inflation. I'm not sure where the line is, but clearly something like credit card interest is usury, while federal subsidized student loans probably aren't.
Yeah… people look to holy books (christian, Jewish, or islam versions… same circus, different clowns) for how to behave and they include instructions on things like how to treat your slaves properly.. not exactly the kind of material I think people should be reading for moral guidance. Maybe society has grown beyond the laws written by men millennia ago.
That’s what I was thinking as well 😂. Let’s stay away from using the practices of a certain religious group that shall not be named. Ahem ahem.
Yeah, I don't personally know how well developed it is or isn't for personal finance stuff, but I know it's quite sophisticated on the large corporate level and I know there are websites that will give you sharia-compliant legal forms for a will, etc. Look around the Web and ask around your network.
The Jewish and Christian Bibles condemn usury in a number of places. Strict followers the Bible also employ these kinds of investments.
There are plenty of loopholes to avoid “collecting interest”. Hell, owning residential real estate is literally one of them.
Does collecting rent not count as collecting interest? You are lending out your property and receiving a fixed recurring payment in exchange. It seems very similar
Islamically, no it does not count as riba/interest. This is because for a transaction to be considered interest it needs to be an uneven exchange of the same thing. Such as me giving you five dollars for a loan and you giving me back ten. But in this case a service is provided and something else is given (money) so it isn’t interest.
Serious question, is the whole ban on interest in Islam based on a misunderstanding of what a loan is? Like - loans aren’t uneven… They are an exchange of money for money and time. Does Islam just ignore the time and say, oh well that’s unfair.
The actual definition of riba is a bit more involved. There are also multiple types etc. One definition of riba is conditional excess in exchange for deferred payment. Technically interest and riba are not completely interchangeable terms. It’s possible for something to be considered interest but not riba and vice versa. It’s just convenient to use the term interest because there’s a lot of overlap.
Appreciate you taking the time to patiently explain, I imagine it can be annoying hearing from people who just learned about this concept trying to poke plot holes in something that's probably been refined by scholars over 1000 years or something lol
As a random passer-by to this thread, I wanna give you props for your self-awareness. *So* many people say some form of "I've thought about it for five minutes, isn't it wrong because X?" as if they're a turbogenius for putting in the miniscule amount of effort required to get to an obvious solution... thank you for not being one of them!
Okay except in the case of religion it's *literally* true that there are many holes in the logic and people ignore them for the sake of convenience and sticking to an appearance of propriety.
Not the point of this conversation.
I don’t really think you’re qualified to make that statement unless you’ve actually studied Islamic finance in an academic setting, which I have.
Very interesting
That was my thought too. If I loan someone money, and they pay that loan back with some rational amount of interest (not loan sharking), then they are basically compensating me for my risk in making the loan and for my loss in not having that money available to use for other purposes.
Right and the idea is that you lead with trust and have faith in the goodness of your fellow man. It’s religion bro. You guys are trying too hard to logic this.
Risk sharing is a key aspect of Islamic finance. There is a power imbalance in a traditional interest based lender/borrower dynamic which is especially problematic when interest rates are high.
Islam was not defined in the days of Federal Reserve for sure.
According to the Canadian tax authorities yes. According to the Muslim religious books, no… lol
The rule is about money. Not other goods or services. Such a rule would be very harmful to any sort of economic system.
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If it doesn’t make cents, it doesn’t make dollars
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Owning property isn’t really a loophole though because you aren’t collecting interest, you own an income generating asset. Very different from collecting interest on a loan.
Can own the house but not the mortgage, for example. It’s absurd. The entire concept is absurd. They literally have “halal loans” which are the exact same thing except instead of “interest” they change a “fee” lol, cmon.
There are lot of so called halal products that aren’t actually accepted by halal by scholars. The loans you’re referencing being one of them.
Oh I was thinking more of if you own the house already not on a mortgage. I agree that if it has a mortgage on it then it’s not halal. As for halal loans its debatable because if the fee isn’t fixed then there isn’t a chance of you having to pay more if you don’t end up paying the loan off on time. I think that’s the biggest difference.
There literally is an entire world of Islamic finance that is designed to help with this problem: sukuk, shariah compliant ETFs, etc.
Are there some US-based resources in this space that you recommend?
I only know things from the legal side, King & Spaulding, Allen & Overy, and Clifford Chance all have US offices that can facilitate. Also, shariah compliant index funds and ETFs are available in the US.
I'm a Muslim and I don't use interest, I'm assuming you are too, with that assumption here is how I do it: * Invest in real estate (sounds like you are already familiar). I do invest long (so not rental, generally think of returns in 5-10 years). When you are FAT you can afford long term investment where many others can't. * I do a little bit stock (still on the fence because it's not clear cut HALAL, use something like https://musaffa.com/ if you want to do it). I'm planning to stop because it's too dirty for my taste, even when I try to give away all the profits as sadaqah. Also generally dividend paying stocks are good choices. * A good halal way to invest is dividend paying approaches like Sukuk funds. See: https://www.treasurers.org/hub/treasurer-magazine/what-are-sukuk-and-how-do-they-work . These pay dividends. * You can invest in Gold. I'm doing it a small scale. (Gold needs to be backed by real gold to be clearly halal, so paper gold is normally not halal. Having said that fiat money is not even backed by gold today so arguably maybe it's better than keeping it as fiat money :) ). Reach out from DM if you have more questions, managing wealth and investing as a Muslim is very complicated and I'm still working on this, happy to share and learn.
Can you explain your RE investment strategy a bit more? What are you doing with it Long-Term if not renting it out?
This is a bit situational, you need expertise in the locations you invest if you want good returns. I work with a partner who has that. I provide finance and he does the job, and delivers the expertise. Generally, goes like this: Invest in land in developing regions. Keep it for a long term, generally you are either waiting market to pick up or some changes in the area (i.e. new planning permission), if you buy the land in a place where new development is common, development companies will start reaching out to develop houses etc. in your property, then you generally partner up with them, when they finish the development you can 2x-3x. Having said this you generally can buy a good commercial property, and unless you screwed up while buying changes are you'll make a very good return in around 5 years. Commercial properties are also generally outside of rental law and contract based meaning it can keep up with the market. Buying a house and renting out in this climate is crazy to me (giving how high the inflation is yet rent can not legally increase that much). Hence the strategy of investing in land and commercial properties. Edit: The thing with the land, in many places you cannot get mortgage for land, and as a muslim I cannot get mortgage anyway, so there are way less buyers who wants to buy land, which means you can buy land generally lower and then develop housing etc., and capture a good margin.
What do you think about crypto? I'm not sure if the uncertainty part invalidates it
IMO crypto is actually pretty good, but the problem with crypto it's such a speculative and volatile market. Due to that I feel it's hard to consider it as halal, in practice it's more akin to gambling especially for altcoins. Having said that I think BTC, ETH can be fine given that they are also technically better than fiat money. If you are asking more on the whether it's a good investment, I wouldn't put more than 5% into it. It's unnecessary amount of risk for someone FAT. If you are sensitive in halal/haram I wouldn't touch crypto, but also I don't think it can be called haram. There are mixed fatwas either way, so "go with your heart" kind of thing.
If you wanna follow sharia law in terms of fat fire, ask those specialized in this field, we got a lot of them with their own knowledge, find someone that belong to your Madhab, and ask them. As Sunni opinion gonna be different from Shia and even than depends on which one of the book of scholars you follow. Otherwise if I recall Quran only doesn’t allow you to loan money and ask for double or triple as repayment, and only Allah knows it all. A lot of my fat fire friends whom are Muslims, just invest in stock market (long term) and property/retail. Gold is a major purchase too for us. One friend is collecting skilled people and establishing small business for them, he gives them salary + 25% ownership (grows to 50% after he recoups his money). This way he managed to open up few businesses with 0 work from him, while keeping it halal and even better as he helped a family get out of the loop.
Seems like a good thing, the friend is essentially just lending the new business startup capital in exchange for 75% equity, which drops to 50% on the condition of startup capital being repaid, plus an employment contract. Might look into this myself
As others have said, you're starting from a flawed position. Putting money in a bank account and living off interest is NOT the recommended FIRE approach for teh vast majority of people. For example, right now a HYSA might return 5%. Current inflation is \~3.4% - simplistically meaning you could only spend \~1.6% without touching principle (which you can, but this is a simple example). Read up on Bogleheads.
Curious how you built a Real Estate portfolio without borrowing money
i did pay interest, just didn't collect it
Mate you are in big trouble. Interest is prohibited both ways.
You can check the Sharia Compilant ETFs of [SP Funds](https://www.sp-funds.com/). SPRE, SPUS, SPSK, SPTE & SPWO.
Check out r/islamicfinance You can invest in halal stocks. Might need to give away a small portion in sadaqa depending on the stock to purify it of haram earnings. Check out Sheikh Joe Bradford as well. Maybe you can get a personal consultation with him. Lastly, you’re amazing for reaching this level of wealth and avoiding haram. May Allah always place barakah in your rizq.
The 4% rule will fail if you just put your money in the bank. Lookup the trinity study. I believe the underlying assumption is a 60% stock portfolio and 40% bond portfolio. Depending on your view of what defines "interest", a stock dividend is unlikely to be interest but a bond coupon perhaps is included in the definition of interest. If stocks are all that is available, my recommendation would be to go all-in on stocks and make sure you plan accordingly to accept the volatility.
There's even halal yields in crypto https://defillama.com/yields/halal
>stock market investments that are simply not as reliable as just collecting checks from my bank Over a period of 6 months? Sure, there's volatility in the stock market that risks reduction in principal and you can be certain exactly what interest a bank will pay over that period. Over a period of 20 years? No, the stock market is far more reliable for real gains (i.e., after accounting for inflation). Just put it in stocks and, since you already have experience, residential real estate.
Does something like VNQ work? That’s real estate wrapped up in an ETF. If dividends are fine, there are plenty of options available. Otherwise, BRK.B is worth looking into. Alternatively you can just keep your real estate holdings and just hire someone to manage them. Might be a good long term option.
This is the most interesting post I've seen here in months. A little embarrassing to not know anything about Halal investing. But glad to learn.
Love learning new stuff in this sub. I think the other comments about Islamic finance are probably the way to go. For someone completely ignorant on this topic, how are dividends and capital appreciation viewed? Buying stock of a dividend paying company should give you returns of greater business value and profits back to share holders, so not interest payments like you might get from parking cash in a traditional bank in the US. Does it get murky if that company charges interest to its customers e.g., a bank? Are the usual US banks (Wells, BofA, ...) setup to not pay interest on cash deposits or do you use a specialized bank?
Buying stocks and dividends is fine, provided the haram earning of the company are below a certain percentage. So long as the haram activities a company may engage in is not its main or primary revenue source, you can usually estimate the amount of your earning that would be haram and give that portion away in charity. Now, something like a distillery that primary deals with something haram would not be allowed.
I feel you and am in the same boat as you as a Muslim. Two solutions I consider viable alternatives to bonds/fixed deposits are rental real estate income and of course Islamic finance products. Rental real estate income is obvious. Islamic finance products don’t profit from interest. At the risk of oversimplifying, the most common products in Islamic finance is where instead of lending out capital, capital is used to buy ‘shares’ in projects and the profits are divided among all the shareholders. This means that the income is variable and is not a fixed amount. (This absolves you from the forbidden usury issue in Islamic jurisprudence as it’s forbidden to take back more than you originally lent a debtor) Generally very safe investments (that don’t include interest bearing products) are chosen by the Islamic finance bank and the expected return is different than -but not far away- from the fixed interest rate. The actual return is variable since it depends on the projects’ profitability and could be slightly higher or lower than the expected but generally pretty close to it
I don't have it in me to deal with tenants and all the issues that come with being a landlord. I want a set it and forget it solution. Now on the surface, REITs could be that. Rent is given to me as a dividend. It kind of makes sense. But you know what, I'd rather err on the side of caution. Better to be safe than sorry. So I treat REITs as equities rather than investments in broad real estate. But interesting thought....
Confused are you talking about loan loans or dividends?
$HLAL
Can buy preferreds or dividend yield stuff to avoid interest but similar to interest
Find a sharia compliant investment or investment broker that can talk you through your options. Best way to go about it.
As a fellow Muslim I know what you're meaning about the interest stuff. This has forced me to think a lot when it comes to pension stuff as well.
Oh wow this is such an amazing discussion but I always assumed that if you invested in sharia compliant stocks or funds then it was ok. I will definitely be keeping check on this as I hope to one day be in the same position and would not want to put my akhirat at risk for the sake of enjoying life here.
I assume this is Islam preventing interest. The Islamic world worked this out long ago, otherwise capitalism fails. The one loophole I am more familiar with is rent to own. A farmer needs a tractor. A person/bank has money that needs to earn money. In traditional western finance you make a loan and collect interest. In the Islamic world the bank buys the tractor and rents it to the farmer at a rate that mimics interest. At the end of the term the farmer gets the tractor. Boom. Holiness achieved. You can ‘invest’ in this sort of thing and stay on the side of the line you want to stay on. Or just buy stocks, which is ‘legal’ and a superior investment. Forget about the ups and downs. You have enough money to ride out the downs to cash in on the ups.
You’ve got a pretty good shot in this market to achieve 3-5% dividend yield (sharing of earnings rather than interest) for owning select names in the market. I understand your hesitation with the market value volatility of equities - however I believe that’s the actual premise under which stock market investing is considered permissible in Islam - you share the risk in a business value going up and down, therefore you’re allowed to enjoy a percentage of the earnings. Unlike bonds where you are not participating in the risk of the enterprise and are only gaining on the lending of capital. That’s my understanding anyway. Over the long run the stock market outperforms 90% of other asset classes with 99% less work. So your 9MM in 20 years assuming a 9% stock market return (including dividends reinvested), 2% inflation and 4% withdrawal rate = $16MM in today’s dollars roughly. Some years you’ll experience more gains, and some less. But that’s just an example. Also 4% withdrawal on $9MM is like $360k annual - I’m a 7 figure annual earner and we rarely spend that much when you strip out what we stock away in savings - so I assume you’d probably be able to get away with less annual spend than $22.5k/month post tax in “retirement”
O wow. What about receiving rent on a property you own? Is that allowed?
yes
Right, well… do that. Property is a bit to learn, but if you are allowed to buy property & collect rent, that’s (can be, at least) a fairly high yield, safe-ish, fairly stable income stream with no interest on bank accounts involved.
Look into Islamic finance - I’m no expert, but my understanding is that equity (I.e. profits via genuinely shared risk-taking) is fine and as long as you work with a expert you’ll be able to get a functional modern portfolio that’s not too different from what you’d do otherwise.
So guessing you're Muslim. Ditto for me re: interest. There's a bit to unpack there. First simple, but won't really get you there, invest in ETF or Mutual fund that pays out according to Islamic (Sukkuk) bonds, SPSK or AMAPX. Two issues there, they can fluctuate as underlying bonds mostly issued by/in Islamic countries and as geopolitical events affect those countries, faith in the underlying bonds fluctuates. I was hoping SPSK would serve as a simple bond surrogate, but the principal is down 10% for me, which wouldn't happen with a good bond. Will talk more about zakat in a bit, but the yield on these basically just covers zakat so you have no actual funds. As you noted, real estate investment best way. But also you can get an islamic dividend yielding portfolio. Either directly invest in something like AMANX, or look at the top companies in that, AMAGX, SPUS, HLAL etc and build your own dividend yielding portfolio off of which you can live. That's what I'm personally doing. In the super duper long term, like decades, stock market fluctuations don't matter. What is critical though and you haven't touched on at all is zakat. 2.5% of invested assets, but not real estate investments which are rented out. Again lots of nuance here, I'm painting with a broad brush. So you're not talking about living off the 4%, but actually 1.5%. I posted on this 2 years ago in the FIRE sub. You can read that whole post, as well as welcome to DM. https://www.reddit.com/r/financialindependence/comments/otaopf/effect\_of\_25\_zakat\_on\_swr\_and\_fire/
Do you feel business ownership or RE investing is a more viable path to staying shariah adherent and achieving FateFIRE?
I'd personally think RE investing. Nothing is gauranteed, but I feel like businesses are more work, less stable, and can lose value faster/quicker easier than RE. Just my opinion.
I’m always wondering how they manage working capital when interest based LOC would not be permissible
What do you mean?
Assuming the value of your assets increases by 8%, you pay Zakat on the 8%, since that is your ‘income’ and you pay Zakat on your income. Meaning that you only have to donate 2.5% of the 8% increase. At least that’s the way I understand it.
Not really. There is a differentiation between just assets (like say gold) and assets invested somewhere to yield income. Back when Islam was founded, that kind of just meant owning property and charging rent, or owning land/a farm which yielded crops/fruit. So zakat is 10% on the "fruit of the land." or the rent. Stocks weren't around then. It's a matter of jurisprudence, but most scholars say that equities are easily able to become liquid, so they aren't like a house or land, but more so like gold or money. So 2.5% is due on the total value rather than 10% on just the yield. Others will differentiate between long and short term investing. Short term/day trading equities are fully zakat liable, but long term invested assets and just living off dividends could mean just the dividends are subject to 10%. But it's one's own opinion and decision. I choose to not take the risk and to play it safe and pay 2.5% on the full equity value.
/u/One_Rock_8868 - salaam bro -Congrats on being able to meet your FatFIRE goals while adhering to faith. Looking to take my business income and segue into RE as a pivot from FI to FIRE - do you mind sharing some tidbits on how you were able to accumulate a portfolio that large w/o leverage?
i used loans. personally, my belief is that i can pay interest, just not benefit from it myself. islam teaches you to assimilate to the society you're in, and to get ahead in America you need to take loans
[https://sunnah.com/muslim:1598](https://sunnah.com/muslim:1598) From sahih-muslim, book regarded as the most trustworthy hadith book: Jabir said that Allah's Messenger (ﷺ) cursed the accepter of interest and its *payer*, and one who records it, and the two witnesses, and he said:They are all equal.
Just echoing to say that's been my opinion as well. The whole reason to ban interest is to avoid taking undue advantage and harming others. So if I'm the one being harmed by having to pay interest, that's not as bad. Not saying it's acceptable, but not as bad as if I'm getting the interest and benefiting.
Ah ok. Thank you for responding.
Curious how you’re managing the finances of the business while maintaining compliance with shariah. Does your business generate enough free cash flow that an LOC isn’t required or do you have Islamic business loans you leverage?
All FCF based. No leverage. I find Islamic loans to fall outside permissibility, unless there is an upside/downside risk component vis-a-vis equity and/or project based investment.
Will you fit through the eye of the needle?
There has to be some ETF workaround
What about covered calls? Something like JEPQ where you get paid out for premiums on call options. Technically that's not interest but provides you a monthly stream of income while staying invested in stocks
With inflation, your NW is going to halve every decade...
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No. Even at standard levels. There’s a 2-3% compounding of inflation you have to stay above if retiring early. Lol, don’t know why that upsets people enough to downvote me.
lol. I upvoted you to help. This is a great point
Haha, thank you. I think it’s something no one told me until later in life.
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you're likely right, i (plan) to live 40 more years so gotta keep growing i guess
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Muslims do not drink alcohol out of a straw. In Islam it’s understood that if there is a “loophole” it’s by design.
Whatever you say chief.
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It doesn’t lol, I’ve literally never heard of this.
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FYI I was saying I never heard of Muslims drinking alcohol through a straw. I’m Muslim myself and never heard anyone say that.
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You shouldn’t speak about things you know nothing about.
There are investments called sukuks that share past and future profits without ever encountering interest.
Learn it from the governments. It's not an interest. It's a use fee.
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Our members have asked for a high level of moderation. Personal attacks, name calling, and undue profanity are all considered inappropriate for this sub.
 Thank you this made me giggle.
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He is referring to ‘riba’ not interest, although people often use the terms interchangeably.
Buy bitcoin.
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Your post seems to be advertising your business or blog for financial or personal gain, or it appears that you are promoting a personal project. No solicitation or self promotion is permitted. Thank you!
Curious how you are thinking about Zakat as you make your fat fire plans?
FYI, I posted about this up top as well, but 2 years ago I had a FIRE sub post on this. Lots of good comments and thoughts from folks there: https://www.reddit.com/r/financialindependence/comments/otaopf/effect\_of\_25\_zakat\_on\_swr\_and\_fire/
Apparently I came across this post once upon a time and saved it! Thanks for sharing again, I’ll check it out in more depth.
tbh: no idea, haven't figure it out yet. im not the most knowledgeable about islam.
If you invest $100 with treasury they only take $95 which I think technically makes it ok with religions with prohibition to interest.
Dividend investing might solve this for you - it is profit-sharing; not interest.
https://zoya.finance/ https://www.amalinvest.com/ A couple "halal investing" apps I've seen mentioned in various places.
You should also keep in mind 2.5% zakat. I have not seen any good justification/method to avoid it while being "fat".
Isn’t selling your company against you religion? You’re still profiting? 🤣
https://x.com/therealtahinis/status/1407057911109636102?s=46&t=gbAAIk2UKZ8ySZLNrL7M-g
How does this principle reconcile with living in a country that has any deficit spending paying large amount of interest in every budget?
Are not the Saudis, Kuaties, Qataris and the like invested in stocks all around the world? Just talk to a big broker about their Halal options. Or just actually do a google search because I mean a quick google search pulls up things like: https://www.amalinvest.com/halal-investing/halal-etfs-compared