With the RRSP deadline behind us, and B.C.’s pending return to GST/PST and income tax season, money matters are once again weighing on the minds of Canadians. The tax season is stressful enough for many, but a lot of Muslims who adhere to a different set of rules when it comes to money and finance, still manage to navigate the haze of the Canadian monetary system, while complying with Islamic financial principles.
Husband and wife Amr Halem and Hana Hamdoun own and operate Pyramids, a Mediterranean restaurant and grocery store in Vancouver. Halem, originally from Egypt, worked in the food industry in the Middle East for several years. Hamdoun, originally from Lebanon, has experience in cooking and catering. In their business, the flow of capital and money changing hands is an everyday occurrence, but they take care to follow the rules of Shari’ah banking.
What is riba?
“There is a great difference in Islamic regulation, between lending or funding for business and funding from difficulty,” says Halem.
He explains that paying charges on interest owed on personal loans for personal gain is forbidden in Islam. According to the Institute of Islamic Banking and Insurance (IIBI), Shari’ah prohibits riba, which, simply put, denotes any increase on capital obtained by the lender. So the charging or paying of riba is not allowed.
However, when it comes to dealing with the use of money in business, Halem says that there is a special regulation for that – interest is calculated according to income and profits earned. The IIBI website notes that there is often a misconception that Islamic banking operates on a zero interest rate, but under this system, interest is merely expressed as a ratio of profit.
The IIBI states that Islamic economics is a system of social and economic justice; it is against exploitation and abides by ethical laws to investing and lending. It also says that Islam warrants individuals to work for his living.
“I’m asking something for something, without doing hard work to get this money…in this case, this is called riba,” says Hamdoun.
When Halem first opened up his business with his wife, he did it all from his own pocket, without getting any loans or funding from the bank. At the same time, he tries to pay off his credit card every month so that he doesn’t get charged with interest. He also refuses to open a savings account and only uses a chequing account.
“No need for that. I don’t need 2% from the bank because, you know, I’m [doing] business, so no need for this profit,” he says.
Role of community in money management
For Muslims down on their luck and in need of financial assistance, they can typically count on their community to help out.
It starts from the mosque, says Halem. But it is basically friends, family and the community contributing money to someone who needs a financial break, he explains. He says Muslims all over the world abide by this custom, and so it is better not to borrow money from the bank.
“Muslims are targeting to help people because this is one of our Islamic rules, to help each other,” Hamdoun further clarifies. “One day, maybe we also need help, so they will also help us.”
The IIBI states that one of the main concepts of Islam is to care for others because we gain through giving, as written in the Quran 30:39 and 2:276.
“Also, every religion has this basic charity of sharing and helping…so if I help any Christians or any Muslims, or any religion, I can help him because he’s a human being,” says Halem.
Islamic banking in Canada
In her 2011 thesis for Athabasca University entitled, An Islamic Banking Model in Canada, Laura Edward, MBA and Senior Project Manager at RBC, stated the pros and cons of hosting a Shari’ah-compliant banking system in the country. An Islamic financial institution in Canada could leverage a growing niche market and its benefits could create spillover effects in the economy, wrote Edward. On the downside, there are no existing charters that allow for Islamic banks to flourish, and it is not clear how big the market size actually is, she notes.
For Muslims in Canada, Halem believes that charging everything to credit cards is difficult to get used to. Most Muslims, he says, try to avoid credit cards due to the interest rates attached to them.
He says in Egypt banks look at a client’s whole financial history, not their credit history, when determining who gets loans.
“I think the credit history, this is not typically reflecting your financial situation,” he says.
Halem recommends taking cues from Islamic banks, pointing out that the financial crisis that has affected much of North America and Europe has not affected the Middle East to a great extent.