Preparing your finances for Ramadan

Manal Fouz, Chief Compliance Officer

This month, Muslims worldwide will embark on a personal journey of self discipline and spiritual renewal. They will abstain from food and drink, give charity to the needy and attempt to recite the Qur’an in its entirety before month’s end. In addition to these rituals, many will use the holy month of Ramadan as an opportunity to perform an overall assessment of their lives. As you perform your assessment, consider reviewing your relationship to money—specifically, how you invest it.

Invest with faith
The way we invest our money reflects our personal values. Although you may never consider smoking or drinking alcohol, your portfolio may be laden with such companies. So, identifying the companies that don’t align with your values is important. But that’s easier said than done. For example, the company Schweitzer-Mauduit International sounds harmless enough, right? Think again. They actually engineer a wide range of specialty paper, primarily for the tobacco industry. On a personal note, my father and father-in-law were heavy smokers who ultimately succumbed to cancer. I don’t want my money invested in anything related to the tobacco industry.

You may also want to actively seek companies that support human rights and avoid those that don’t. A few years ago, I met a physician who was passionate about promoting justice for Palestinians living in the Occupied Territories. One day, I finally convinced him to have us screen his investments, which were held in conventional mutual funds. He was surprised to discover that much of his money was invested in companies profiting from the occupation, including Motorola, SodaStream and Caterpillar. One bright spot was that he also held Cisco, a technology company that has created jobs and supported economic development in the West Bank. As a values-based investor, it’s companies like Cisco, not the others, that you want to own.

Avoiding interest
As you complete your recitation of the Qur’an during Ramadan, you’ll come across the following verse:  “O you who believe, fear Allah and give up what remains of your demand for riba (interest), if you are indeed believers. If you do it not, take notice of war from Allah and His Messenger.”(Qur’an 2:278-279). Think about what Allah is saying in this verse, and then try to find another verse where Allah declares war on other sins. I haven’t been able to find one. One of the easiest places to stay away from riba is in our investment portfolios. You have the choice to invest or not to invest. Sadly, I’ve seen far too many account statements invested in riba-based investment vehicles, like bonds and highly leveraged stocks, so I speak from an informed position when I say that there are many of us whose investments are not aligned with our values.

Take the first step
Sometimes our investments don’t align with our values because we just don’t know how to start. Here’s a tip. Begin by identifying what matters most to you. For example, is it important that your investments are in compliance with the consensus Islamic opinion on investing? If so, you’ll need to learn what these guidelines are and how your investments compare. You’ll need to review each company’s financial statements, annual reports and websites. Keep in mind that mutual funds don’t disclose their holdings daily, but there are ways to obtain their quarterly holdings. Admittedly, it can be a daunting task. That’s where Azzad can help. We’ve developed a proprietary software program to screen thousands of publicly traded companies for compliance with Islamic guidelines. Call us at 1.888.86.AZZAD, and we’d be happy to help you with this part of your assessment for free.

Ramadan Mubarak, everyone!

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