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Hejaz Financial Services

How Islamic finance works

Learn the difference between Islamic and Conventional

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How is Halal Financing Different?

There is a misconception amongst the general public that Islamic finance is the same as conventional, simply because both specify the finance cost as a percentage. This is a huge misnomer because using a percentage is just a method of pricing. Hence, what is most important is not the use of the percentage, but rather what such a percentage represents.

See example

Built by experts,

approved by scholars

Our Shariah board members continuously monitor our operations, systems, and technologies to ascertain that we are completely adhering to Shariah standards.

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Our principles

The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is an Islamic international autonomous non-for-profit corporate body that prepares accounting, auditing, governance, ethics and Sharia standards for Islamic financial institutions and the industry.

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Our global sharia board

Global Islamic Financial Services Firm propriety limited (GIFS) is a South Africa-based company specialised in providing Sharia Advisory services, supervision, Sharia auditing and human capital development. Their advisory board comprises of experienced scholars and financial experts.

What Makes It Halal?

Interest-Free (No Riba)

Under Islamic law, Riba (or interest) is prohibited as it’s an exploitative arrangement that keeps the poor as they’re stuck with ever-growing debts whilst the rich increase their wealth without creating any extra value.

Shariah Governance

Two layers of Shariah governance. Including an internal Shariah compliance function, and an independent external Shariah auditor.

Shariah Compliant Transactions

Our finance and mortgage products are based only on Shariah compliant underlying principles including Ijarah finance.

Clear & Transparent Contracts

Contracts are fair, clear, and transparent. Both regulatory and Shariah compliance requirements have been reviewed by our legal and Shariah teams to ensure relevant compliance. Terms are laid up front in clear and simple language.

Non-Bank Funding

As an Islamic Investment Management firm, Hejaz funds mortgages through its investment funds. A truly unique, Sharia-compliant, ecosystem.

Those who consume interest cannot stand [on the Day of Resurrection] except as one stands who is being beaten by Satan into insanity. That is because they say, “Trade is [just] like interest.” But Allah has permitted trade and has forbidden interest. So whoever has received an admonition from his Lord and desists may have what is past, and his affair rests with Allah . But whoever returns to [dealing in interest or usury] – those are the companions of the Fire; they will abide eternally therein.

– Surah Al-Baqarah [2:275]

Trade (Ijarah Model) vs Riba

The basis for all Islamic finance lies in the principles of Sharia, or Islamic Law, which is taken from the Qur’an and from the example of Prophet Muhammad (peace be upon him). The Islamic form of finance is as old as the religion of Islam itself.

From the above verse, scholars have interpreted it as riba and trade has the same outcome, but one is allowed and the other is not. Though the outcome with Islamic finance and conventional loans are the same, the way we get to the end goal is very different. Just like halal chicken and nonhalal chicken, at the end of the day, it is still a chicken.

Let's break it down

Hejaz

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The home buyer and Financier agree to share beneficial ownership of the property.

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The two parties buy the home and the beneficial ownership of the property is determined by each party’s down payment.

finance pitch deck-05

The home buyer makes monthly payments to the Financier. Part of the payment is a rental charge for full use of the home and the rest is a payment to increase the buyer’s beneficial ownership/equity in the property.

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Over the course of the arrangement, the home buyer acquires more equity in the property from the financier and becomes the sole legal and beneficial owner of the property.

Banks

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The home buyer arranges a loan from a bank or mortgage company according to a fixed or variable interest rate.

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The home buyer purchases the home.

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The home buyer makes monthly payments to repay principal and interest on the loan.

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Over the course of the loan, the home buyer repays the debt in full.

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For example:

A car dealer can buy a car for $1,000 and sell it for $1,200 making a profit of $200, which can be expressed as 20%. On the other hand, a person can lend someone a $1,000 dollars and demand that the borrower pays it back as $1,200, thus making a 20% interest.

The difference between the two scenarios from a Shariah point of view is that the 20% made from selling the car is a permissible profit (as it involves taking risk of ownership in the items being sold), while the 20% interest on a loan is the pure definition of prohibited Riba (where the lender did not put any work or take on any risk to earn such increase).

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