Author of “Practical Islamic Finance” blog
A touchstone is a piece of fine-grained dark schist or jasper formerly used for testing alloys of gold by observing the color of the mark that they made on it.
The two main touchstones of Islamic compliance in Islam are the Quran and the tradition and sayings of the prophet Muhammad – peace be upon him (known as Al-Sunnah in Arabic).
Scholars in the Quran and Sunnah can readily refer to these touchstones when making a judgement on the level of Islamic compliance for a particular product or investment.
It would be useful if there were a set of mental touchstones the average consumer could readily use to know if they are truly dealing with an “Islamic” investment or just one that advertises itself as such.
In this article, I propose 3 simple touchstones in the form of questions that anyone can answer about any financial product without knowing anything about Islamic finance. The answers to these questions should give the consumer a strong indication about whether or not the product they’re dealing with is truly Islamic.
1- Can you see the mercy?
All commandments a Muslim is asked to adhere must have one purpose and one purpose only. This purpose is specified in the Quran as providing mercy to everyone and everything. The generous Quran in Surah Al-Anbya [the prophets] 21:107 says:
We have not sent you [O’ Muhammad] except out of mercy to the worlds.
You can see the purpose of spreading mercy manifest in everything Islam has prohibited. So for example, as it relates to finance:
Islam forbids charging interest so people don’t find themselves enslaved by debt.
Islam forbids gambling so people don’t gamble away their hard earned money and experience financial ruin.
Islam forbids ambiguous trading terms so disputes are avoided.
The common denominator in the reasoning behind these prohibitions is providing mercy for its adherents.
So in order to explain why a product is Islamic, you need only understand why it’s more merciful than the alternatives. The reasons why a certain product is more merciful than non-Islamic alternatives should be easily discernable to the average customer.
So ask the company selling you a purported Islamic product or investment to explain why their product is more merciful to customers than non-Islamic products. If they are unable to convincingly do so and instead drown you in procedural differences or keep repeating the phrase “We have a Shariah-board that approved it” hoping that you offshore your duty to understand their product to their Shariah-board then this should be a huge red flag for you and cause for you to be wary of this particular product’s actual adherence to Islamic law.
Albert Einstein once said: “If you can’t explain it simply, you don’t understand it well enough”. And if a seller doesn’t understand well enough why their product provides more mercy than alternatives, then it probably doesn’t.
2- Does the product have non-Muslim customers?
The generous Quran in Surah Ar-rad [Thunder] verse 17 says:
“He sends down from the sky rain, and valleys flow according to their capacity, and the torrent carries a rising foam and from that [ore] which they heat in the fire, desiring adornments and utensils, is a foam like it. Thus Allah presents [the example of] truth and falsehood. As for the foam, it vanishes, [being] cast off; but as for that which benefits people, it remains in the earth. Thus Allah presents examples.”
Notice here how the Quran associates the staying power of truth with the benefit it brings to “people”. Not necessarily Muslim people but all people.
So it seems logical then to conclude that the products that are Islamically compliant, are those that benefit people. And if a product is beneficial to all people it seems logical to expect it will have non-Muslim customers.
If upon asking the question: Does this product have any non-Muslim customers? You find out the answer is no, then I would contest that there is a good chance you are just buying the words “Islamic” or “Shariah-compliant” that were used when the product was marketed to you. Since non-Muslims don’t place any value on these words, they haven’t bought the product.
One must expect that if the product truly was a beneficial product some non-Muslims would have seen this and bought the product. Especially if the company is well-established and offers its product in a predominantly non-Muslim country!
Case in point: There’s a food cart in New York City which recently became a franchise called “The Halal Guys”. It has had amazing success selling Halal food with lines stretching for blocks sometimes. Do you want to know why? Because they sell a great product [at least at their original food cart location, I haven’t tried their franchise locations yet]. You see, most people don’t care if something is Islamic or not so long as it’s a good product.
If a well-established company is selling an “Islamic” financing product and none of their customers are non-Muslims, this probably means that their product offers no unique benefit other than making Muslim customers feel like they’re following their religion.
3- What are the opinions of neutral parties?
The generous Quran in Surah “Ya-seen” verses 20 and 21 says:
20: And from the farthest end of the city came a man, running. He said, “O my people, follow the messengers.
21:Follow those who do not ask of you [any] payment and they are [rightly] guided…
I’d like you to focus on the statement “…follow those who do not ask of you [any] payment…” in the last verse.
The opinion of someone who has nothing to gain from giving their opinion is very important when attempting to evaluate the merit of an idea or product.
If the product relies on a Shariah-board that receives their salary from the same company offering the products they are in charge of evaluating, make sure you take their opinion with a generous portion of salt.
Don’t get me wrong, it’s not impossible for such a Sharia-board to have opinions that are correct but it’s also more likely that their opinions are biased and influenced by the desires of their employer. Even if these desires are communicated implicitly.
Additionally, if the company’s disclosure documents include words like “loan” and “interest” this is because in all likelihood the government’s regulatory bodies think the product is these things and require the company to use this terminology. This is very rarely a matter of government bureaucracy or people in the government not having the mental capacity to understand a particular “Islamic” product.
What likely happened is the government looked at the product, made an independent evaluation [assuming no corruption is involved], and passed an unbiased opinion regarding what the product actually is.
Plainly put, when you see the word “Islamic” in the title of a product, it’s probably there because the product’s sellers think the word will help it sell. So try to see if you can find a reputable nonvested party that can corroborate any claims of Islamic compliance.
So the next time you’re weighing whether or not to make an investment or buy a product that claims to be “Islamic” or “Shariah-Compliant” make sure you use the 3 touchstones I mentioned:
1- Can you see the mercy in the product?
2- Does the product have any non-Muslim customers?
3- What are the opinions of neutral parties?
If one or more of the answers doesn’t check out, trust your logic, and make your decisions accordingly.