Islamic Finance in the Netherlands

A study of the Attitude towards and the Interest in Islamic Finance by young Muslims
and the factors that determine them.

Erasmus University Rotterdam

Rotterdam School of Management
Finance and Investment, June 2009

Hicham Chara (Student no: 260061)

Coach:
Msbc Ying Xu.
Department of Finance and Investment

Co-reader:
Dr. Ir. P.W.J. (Peeter) Verlegh
Department of Marketing Management

2009, Hicham Chara

All rights reserved . No part of this paper may be reproduced or transmitted in any form or by any means electronic
or mechanical, including photocopying, recording, or by any other information storage and retrieval system,
without permission in writing from the author.

In the Name of Allah, The All-Merciful, The Ever-Merciful

The author declares that the text and work presented in this Master thesis is original and
that sources other than those mentioned in the text and its references have been used in
creating this master thesis.

The copyright of this Master thesis rests with the author. The author is responsible for its
content. RSM Erasmus University is only responsible for the educational coaching and
beyond that can not be held responsible for the content.

ACKNOWLEDGEMENTS
This thesis has made it possible for me to combine my religious belief with my field of study.
The research I did for this study was a pleasure and has left me with a feeling of great fulfilment.
This thesis owes much to my coach Ying Xu, my co-reader Peeter Verlegh and especially a
distant advising professor Hans Visser. Thank you all for your remarks and comments. The book
Western Muslims and the future of Islam was the inspiration to choose this subject, therefore I
want to thank Tariq Ramadan.
Special thanks to my brothers (Nordin, Rachid and Mohamed) and my sister Assia who have
supported, stimulated and pushed me to get this far. Our love goes deep and has kept us close,
although we do differ, I thank Allah (swt) for this special bond between us.
To my dear wife Lemyae, I could not have done it without you, thank you for your patience,
support, love and cheering words when I was downhearted, uninspired or lazy. You are my true
love and I am grateful for your precious presence everyday.
And then there are my parents. My dear mother and father who raised me, nurtured me and made
me the person that I am today. Their lifes choices always and foremost were made to ensure we,
the children, would have the chances they never had, they deserve my deep gratitude. Their
efforts, endurance and perseverance have made it possible that in one generation the step from
illiteracy to a university degree was made, although normally it would have taken several
generations. I would be pleased if I could give my children (InshaAllah) half of what my mother
and father have given me.
I pray to my Lord, The Protector for His forgiveness. That He may protect us from evil and lead
us to the right way, for He is my hope and my Light!

Our Lord! Perfect our Light for us, and grant us Forgiveness. (Quran 66:8)
Hicham Chara
Rotterdam, June 2009.

Table of Content of Thesis.

EXECUTIVE SUMMARY ............................................................................................................ 6
INTRODUCTORY ......................................................................................................................... 9
1

SHARIAH ON FINANCE .................................................................................................. 12

1.1

SHARIAH ..................................................................................................................... 12

1.2

SHARIAH ON FINANCIAL TRANSACTIONS ........................................................ 16

1.2.1
The prohibition of Riba ........................................................................................... 17
1.2.2
The prohibition of Gharar ...................................................................................... 24
1.2.3
Rationale ................................................................................................................. 26
ISLAMIC FINANCIAL PRODUCTS.................................................................................. 29
2.1

IJARA (operating lease) and IJARA WA IQTINA (financial lease)............................. 30

2.2

MUSHARAKA (Profit and Loss Sharing)..................................................................... 32

2.3

MUDARABA (limited partnership)............................................................................... 35

2.4

MURABAHA (cost-plus sales)...................................................................................... 37

2.5

SALAM AND ISTISNA (Islamic forwards) ................................................................. 38

OTHER ISLAMIC PRODUCTS .......................................................................................... 41

3.1

EQUITY AND INVESTMENT FUNDS ....................................................................... 41

3.2

FIXED INCOME FUNDS ............................................................................................. 43

3.3

TAKAFUL (permissible insurance) ............................................................................... 45

GOAL, CONDITIONS AND CRITIQUE OF ISLAMIC FINANCE .................................. 47

FACTORS DETERMINING ATTITUDES TOWARDS ISLAMIC FINANCE ................ 49

5.1

COMMERCIAL BANKING ......................................................................................... 49

5.2

ISLAMIC FINANCE ..................................................................................................... 50

5.3

CONCLUSIONS ............................................................................................................ 54

5.4

CONCEPTUAL FRAMEWORK .................................................................................. 54

5.4.1
Religiosity ............................................................................................................... 54
5.4.2
Attitude towards Riba prohibition .......................................................................... 55
5.4.3
Awareness and knowledge of Islamic Finance principals and products ................ 55
5.4.4
Education and Income level .................................................................................... 56
5.4.5
Age and Marital status ............................................................................................ 56
5.4.6
The conceptual model ............................................................................................. 57
METHODOLOGY ............................................................................................................... 58
6.1

RESEARCH DESIGN ................................................................................................... 58

4

6.2

DATA COLLECTION ................................................................................................... 59

6.2.1
The questionnaire and the questionnaires administration...................................... 59
6.3 DATA CLEANING ....................................................................................................... 60

6.3.1
Outliers and Missing values.................................................................................... 60
6.3.2
Inconsistencies ........................................................................................................ 61
6.3.3
Recoding reverse coded items ................................................................................. 61
6.3.4
Conclusion .............................................................................................................. 61
SURVEY............................................................................................................................... 62
7.1

UNIVARIATE ANALYSES ......................................................................................... 62

7.1.1
Demographics ......................................................................................................... 62
7.1.2
Riba Prohibition and Awareness on Islamic Principles ......................................... 64
7.1.3
Attitude towards Islamic Finance ........................................................................... 66
7.1.4
Conclusions ............................................................................................................. 68
7.2 SCALE EVALUATION ................................................................................................ 68
7.2.1
Factor Analysis ....................................................................................................... 69
7.3 BASIC DATA ANALYSIS ........................................................................................... 71
7.4

REGRESSION ANALYSES ......................................................................................... 74

7.4.1
Regression model 1 (Dependent variable= Attitude towards Islamic Finance) .... 74
7.4.2
Regression model 2 (Dependent variable= Islamic Products Interesting) ............ 75
7.5 EVALUATION OF THE HYPOTHESES .................................................................... 76
8

CONCLUSION ..................................................................................................................... 80
8.1

DISCUSSION ................................................................................................................ 80

8.2

ACADEMIC IMPLICATIONS ..................................................................................... 83

8.3

GOVERNMENT AND BUSINESS IMPLICATIONS ................................................. 84

8.4

LIMITATIONS AND FUTURE RESEARCH DIRECTIONS ..................................... 87

References ..................................................................................................................................... 89
Appendix A: European council for fatwa and research on mortgages in the West ...................... 92
Appendix B: Conditions for Murabaha transactions. (Usmani, 2000) ......................................... 95
Appendix C: Regression model 3 (Dependent = Positivity towards Islamic Finance)................. 98
Appendix D: Regression model 4 (Dependent= Lack of Islamic Finance bothersome) .............. 99
Appendix E: Survey Questionnaire ............................................................................................ 100

EXECUTIVE SUMMARY
During this era of economic and financial crisis, governments around the world are
contemplating the role of the financial system and the lack of ethics and control that has led to
this instable situation. Throughout the world Islamic Finance is seen as a new and interesting
way of financing. Muslims around the world try to abide with their religious injunctions on all
areas, including their financial dealings. Muslim majority countries and nations with large
Muslim minorities are providing their Muslims citizens the opportunity to utilize Islamic
Financial products. In the Netherlands the government, several organizations and banks have
investigated the opportunities in this market but so far without introducing it.

The purpose of this study is to give a detailed and extensive portrayal of Islamic Finance,
including the theological basis; the assortment of Islamic Finance products as they now exist and
their implications; as well as an empirical research to The Attitude towards and the interest in
Islamic Finance by young Muslims and what factors determine them.

Islamic Shariah has the basic principal that all trade and transactions are permissible unless they
transgress the prohibitions of Riba (interest or usury), Gharar (uncertainty) and Maysir
(gambling). These are seen as exploitative, unfair, involving unnecessary risk or involving
speculation, which are contradictory to the goals of broader Shariah placing emphasis on
ethical, moral, social and religious dimensions to enhance equality and fairness for the good of
society as a whole. (Iqbal, 1997) To ensure that Muslims abide by these prohibitions scholars
and jurists have formalized several financing products/principals that adhere to Shariah, the
most important ones are Ijara (lease), Musharaka (profit/loss sharing or partnership), Murabaha
(cost-plus sale), Mudaraba (limited partnership), Salam and Istisna (Islamic forwards).

Only a few empirical researches in this field have identified factors that determine the attitude
towards Islamic Finance, these factors are religiosity (in this research inner and actual),
awareness of Islamic principles, education levels and the attitude towards the Riba prohibition.
This study has collected enough primary information on these factors and individual
characteristics from young Muslims through an online survey.

The goal was to capture the attitude of young Muslims towards Islamic Finance and measure to
what extend they were interested in Islamic Finance. On the basis of the factors already
mentioned several hypothesis regarding their influence on the attitude towards and interest in
Islamic Finance were formulated. The sample of 116 respondents consisted of mainly young,
highly educated, ethnically divers Muslims; although a large portion (66%) either are 1st or 2nd
generation Moroccan immigrants. Consequently, the results of the following data analysis can be
generalized to a Muslim population with these characteristics and this group will be a substantial
market share of the entire market for Islamic Finance.

The results of the survey found that the attitude of young Muslims towards Islamic Finance was
positive (18%) or very positive (57%) and only 6% of respondents had a negative or very
negative attitude. Most Muslims (64%) see the lack of Islamic Finance as bothersome. More than
90% were interested in at least one Islamic financing product, especially demand for housing
financing (80%), Islamic Pension plans (63%), Islamic current accounts (69%) and Islamic
savings accounts (68%) is high. The sample did not have a preference for a certain institution,
whether it was a Dutch institution with Islamic products, a Islamic institution from the Islamic
world or a Western Islamic institution did not matter much. However it was found that
respondents have a strong preference for a mixture of international and national scholars in the
Shariah board of such a Islamic financing institution. When asked which factors respondents
regard as important for a possible switch to a Islamic Financial institution the service, the
composition of the Shariah board and the image were named frequently. The results also stated
that Muslims find costs and yields should be comparable to regular financing, indicating that the
institution should not ask for a large premium for offering Islamic products.

The statistical analyses of the data provided interesting findings regarding factors that determine
the attitude and interest in Islamic Finance. Among all factors examined in this study The
Awareness of Islamic principals was found to be the most important driver of the attitude
towards Islamic Finance and the interest in Islamic Finance. A significant positive attitude was
found, meaning that the higher the awareness of Islamic Principals was the more positive the
attitude towards and the higher the interest in Islamic Finance. Other factors that positively
influence the attitude towards Islamic Finance were the attitude of Muslims towards the Riba
7

prohibition and the actual religiosity. This actual religiosity measured the extent to which a
Muslim practices the Islamic rituals such as prayer, morning prayer, mosque attendance and
collective Friday prayer. It was found that the higher the actual religiosity the higher interest in
Islamic products. It was also found that the higher the age the more negative the attitude towards
Islamic Finance.

This study has its limitations and therefore sets out future research directions. However, it should
be highlighted that this empirical study successfully identified several factors that determine the
attitude of young Muslims towards Islamic Finance. The findings contribute to the formation of a
theoretical framework that describes the determinants of the attitude towards Islamic Finance and
their interest in Islamic financing products. It also has implications and gives recommendations
for businesses, institutions and organizations that desire to offer Islamic products in the future.

INTRODUCTORY

slamic Finance is the result of several laws within Islamic law, Shariah, which includes the
prohibition of Riba, meaning interest, usury or overcharge (see the discussion of the
meaning of Riba in paragraph 1.2.1). Shariah, literally the way, is a blueprint for the way

a Muslim should lead his life and the way an Islamic society should be organized (Clark, 2004).
In the first half of the 20th century several Islamic thinkers have derived from Shariah that an
Islamic economy should be formed opposing the western capitalistic system and the eastern
communistic system (Sardar, 1996; Kuran, 2006). This is to ensure that Muslims keep their own
identity and obey the Divine Law, like the first Muslims did in the first Islamic state from the
time the Prophet Muhammad (Peace Be Upon Him, PBUH) founded the first Muslim
community, in 622, until the death of the last of the 4 rightly guided Caliphs1 in 661 (Clark,
2004). Even after that, Islamic modes of finance were widely used in the Muslim World
throughout history and some were even adopted later by western financiers (Iqbal, 1997). Syed
Maududi (1903-1979) the founder of Jamaat e-Islami in the forties in British India, Sayyid Qutb
(1906-1966) one of the leaders of The Muslim Brotherhood' in Egypt and Muhammad Baqir alSadr (1931-1980) a Shii scholar in Iraq were among the ones criticising both socialistic and
capitalistic forms of economy and were strong believers in a more fair and just system based on
Shariah principles which incorporated the idea of The Islamic Economy (Visser, 2007).
In the second halve of the 20th century these ideas have led to the founding of several Islamic
financial institutions in several Islamic countries. The first is believed to be a small bank in
Egypt in 1963-1964, The Misr-Ghams bank. This bank was an experiment and did not project
an Islamic image because of the fear that the regime would characterize the bank as a form of
Islamic fundamentalism. Islamists like Qutb and Al-Banna (1906-1949) were outlawed and
imprisoned and even put to death, because of their thoughts/ideas about the necessity to return to
an Islamic Society, which includes the establishment of new leadership (Qutb, 1964). During the
seventies the climate in the Middle East changed for Islamic thinkers and Muslim supporters of
an Islamic economy which resulted in the founding of several Islamic financial institutions in
1

Caliph means the successor or representative of The Messenger of Allah (Subhanahu wa ta'ala=glorious and
exalted is He) Mohamed (PBUH). The first four Caliphs are seen as the four rightly guided; Abu Bakr, Umar,
Uthman and Ali (May Allah be pleased with them).

several countries. The Dubai Islamic Bank (1975), The Faisal Islamic Bank in Soedan (1977)
and several other Islamic banks followed in the years after in countries like Malaysia,
Philippines, Bahrain, Kuwait etc. (Ariff, 1988) In the Eighties Iran and Soedan even went as far
as prohibiting al other forms of financing (Visser, 2007). The term Islamic Financial system or
Islamic Finance is relatively new, appearing only in the mid eighties.

Since then Islamic Finance has been booming in several other Muslim countries and even
western countries with a Muslim minority. The HSBC Group in 1998 started HSBC Amanah as
its Islamic banking branch; Lloyd TSB has also introduced Islamic windows were Muslims can
utilise several Islamic financing products in the UK. The Islamic Bank of Britain was founded
in 2004 as the first stand alone Islamic bank in the UK. In several other western countries there
are several Islamic financial institutions or Islamic windows among these countries are the US
(Lariba and Devon Bank), Canada and Germany. Islamic windows are normal commercial
banks that have incorporated Shariah compliant products in their assortment and offer these at
special windows. Not only Islamic banking was introduced but also Islamic insurance etc.

As several other western countries are offering their Muslim minorities access to Islamic
products, one could ask why The Netherlands have not. Several organizations and academics
have been researching whether or not Islamic Finance is a real option in the Netherlands. Among
them are The Rabobank, ABN Amro, The Ministry of Finance and Bilaa-Riba. Bilaa-Riba is the
first company that has tried to offer Shariah compliant products. Bilaa-Riba was founded in
2006 and closed down in 2008. Until now all these efforts are unfruitful because of two main
problems. Firstly the interest deductibility in Dutch tax laws, making Islamic Finance more
expensive than regular finance, due to the fact that the costs are not deductible because they are
not interest. Secondly the Dutch real estate laws, causing double taxation due to the sale and
resale of a house within Islamic Finance. Although these problems are not easy to solve the
Minister of Finance, Wouter Bos, has expressed the hope that The Netherlands can become the
Mecca of the financial world. Worldwide the market for Islamic Finance has passed the 400
billion dollars, making Islamic Finance very attractive (Hustinx, 2007). One might say that
before these two problems have been solved Islamic Finance does not have a future in The
Netherlands, but I personally believe that there is a future in Islamic Finance as long as the
10

demand is sufficient. This demand depends on the attitude of Muslims towards Islamic Finance
and their interest in Shariah compliant products. This should be thoroughly researched, before
any further attempts are to be made to bring Islamic Finance to The Netherlands.

The purpose of this study will be to give a detailed and extensive portrayal of Islamic Finance,
including the theological basis; the assortment of Islamic Finance products as they now exist and
their implications; as well as an empirical research to The Attitude of young Muslims towards
and their interest in Islamic Finance and the factors that determine them. Factors that can
influence this attitude could be, age, income, education, knowledge of Islam, what generation
immigrant, land of origin, how pious someone is as a Muslim, etc. The research question is:

What is the Attitude towards and the interest in Islamic Finance by young Muslims and
what factors determine them?

The answer to this research question should be interesting to several parties; companies that are
interested in this niche market to find out how large the possible market is and what factors
influence the attitude, the Dutch government, Muslim organizations that are trying to create
bigger understanding for Islamic Finance, the Muslim community to get a better picture of
Islamic Finance and the academic world to get a better understanding of the factors that
determine the attitude towards and interest in Islamic Finance.

Before focussing on the attitude of Muslims towards Islamic Finance on the basis of a conducted
survey, the basic rulings on Finance from Shariah will be outlaid in the first chapter. In the
second and third chapter the principles and products that exist now in Islamic Finance will be
explained and discussed. After that the reader will have had a comprehensive overview of
Islamic Finance in order to understand the theological basis as well as the principles and
products themselves. The remaining of this study will focus on the factors that determine the
attitude of Muslims towards Islamic Finance and the methodology and findings of the survey.
Finally the conclusions and recommendations will be made.

11

1 SHARIAH ON FINANCE
1.1 SHARIAH

hariah is not merely a collection of do's and don'ts, nor just a code of criminal laws
prescribing punishments for certain crimes. Though it does contain both, its content is
much broader and deeper, encompassing the totality of man's life. Shariah literally

means a 'clear path'. It is the path that man, in Islam, must walk as he toils and strives to reach
his Creator. It is the yearning deep within to seek the Lord and the Master that Shariah translates
into steps, concrete and specific, on the pathway of life. Shariah is the fulfilment of the total
man- inner and outer, individual and corporate-as he seeks to live by the will of his one and only
God (Khurram, M). Or as T. Ramadan puts it; if the idea of establishing rules is indeed
contained in the notion of Shariah (from the root sha-ra-a), this translation does not convey the
fullness of the way it is understood, unless its more general and fundamental meaning is referred
to as the path that leads to the spring. (2004)

The goal of Shariah is broadly accepted to be; to promote the welfare (masalih) of human
beings. The five points that Shariah caters most are: religion, life, intellect, lineage and
property, the objective of Shariah (maqasid al-Shariah) is to protect these five basics (AlGhazali, 1055-1111). Shariah envisages the need for Justice and Equity throughout society.
Justice is perceived in terms of equivalence (in exchange transactions) and reciprocity (in social
relationships), but equity (ihsan) to the needy is urged on top of justice, ergo giving more than is
due according to the standard of equivalence and reciprocity to ensure survival with dignity for
all. Care for others tempers the self-interest that is ingrained in human nature. If the latter is
necessary for survival at the individual level the former is crucial for survival as a group, at the
social level. (Siddiqi, M.N, 2004).
How do Muslims know the will of Allah (swt2) and Shariah? It is based on 4 fundamentals/
sources of law (Usul al-fiqh) firstly formulated by imam al Shafii (767-819) and widely praised

SWT stands for: Subhanahu wa ta'ala is an Islamic Arabic phrase meaning, "glorious and exalted is He (Allah)."
(http://en.wikipedia.org/wiki/Subhanahu_wa_ta%27ala, 15-4-2009)

12

as a framework by the scholars of all legal schools and Muslims (Ramadan, 2009) although there
are differences in the 4th source:
1.The Quran: The holy book of Muslims, which was revealed to Mohammed (pbuh) by the
angel Gabriel, Jibril in Arabic, between 610 and 632, The Quran is seen as the direct word of
Allah (swt) and therefore any orders and bans in the Quran are to be obeyed. The Quran's main
emphasis is unquestionably on faith and the moral conduct of men and nations; but it does lay
down, both explicitly and implicitly, though with brevity, the principles, broad outlines and
necessary rules and regulations which are essential for the formation of the community of Islam.
For one cannot be realised without the other; the trust of Shariah cannot be fulfilled without the
presence of moral fibre of the highest quality. (Khurram, M)
The Quran is seen as guidance from Allah (swt) to mankind:

That is the Book, there is no suspicion about it, a guidance to the pious, Who believe in the
Unseen, and keep up the prayer, and expend of what We have provided for them, And who
believe in what has been sent down to you, and what was sent down (even) before you, and
they constantly have certitude in the Hereafter. Those are upon guidance from their Lord
and those are they who are the prosperous.
(Quran 2:2-5)
In the Quran the Muslim is ordered to obey Allah (swt) and obey his Messenger (pbuh) on
several occasions:

To follow and obey the Prophet is the only way one can love his God and be loved by Him
and have one's sins forgiven (Quran 3: 31-32).
All matters which cause differences or disputes are to be referred to God and His Prophet
as the final authority (Quran 4: 59).
No one can be truly a believer unless he accepts the Prophet as the final arbiter in all affairs
and submits to his decisions, willingly and free from all misgivings (Quran 4: 65).
The Prophet has the authority to permit and prohibit (Quran 7: 157).
Whatever the Prophet gives must be taken; whatever he forbids
must be eschewed (Quran 59: 7).
13

To obey Allah (swt) one has to seek knowledge in the Quran, which is the Divine word of Allah
(swt). But the above verses, which are clearly stated in the Quran, imply that a Muslim should
obey The Messenger (pbuh) as well, which is the second source of Shariah (Clark, 2004).

2. The tradition of Mohammed (pbuh): this tradition (Sunna) consists of thousands of written
traditions about sayings of The Messenger (pbuh), his acts and his silent approval of acts of other
people. These traditions are called aHadieth. This second source is seen as extremely important,
because The Messenger (pbuh) lived by and explained the Quran and as seen above the Quran
ordered Muslims to obey The Messenger (pbuh). Allah (swt) says speaking to the Messenger
(pbuh) in the Quran:

And thus We have revealed to you a Spirit of Our Command. In no way did you realize
what the Book was, nor the belief; but We have made it a Light, whereby We guide
whomever We decide of Our bondmen. And surely you indeed guide to a straight Path,
The Path of Allah, to Whom belongs whatever is in the heavens and whatever is in the
earth. Verily to Allah all Commands are destined to Him. (Quran, 42:52-53)
As seen in these verses The Messenger (pbuh) invites to the way of Allah, explaining to the
people what is not clear of Allahs disposition (AlQaradawi, 2004). A good example is the
prayer which is ordered in The Quran but it is not explained how this prayer should be
performed. The obliged prayers that Muslims do 5 times a day are done like the example of
Muhammad (pbuh) derived from Ahadieth.

There are several Hadith collections the most reliable and extensive are the ones collected by
Imam Bukhari (810-870) and Imam Muslim (817-874), these two are known in Sunni3 tradition
as the two most important authentic collections. There are other important collectors like: Abu
Dawud (817-888), At-Tirmidhi (824-892) and Al-Malik (715-796). The determination of the
authenticity of a hadith is based upon the science of hadith, one part of the authenticity is the
chain of narration, the other part is the narrated itself, each hadith is constructed of these two

Sunni Muslims are the largest denomination of Islam (80-85%)slam is also referred to as Sunnism or as Ahl asSunnah wal-Jamh (people of the example (of Muhammad) and the community) which implies that they are the
majority, or Ahl as-Sunnah for short. The word Sunni comes from the word Sunnah (Arabic: ), which means the
words and actions[1] or example of the Islamic prophet Muhammad. (http://en.wikipedia.org/wiki/Sunni, 15-4-2009)

14

things. The chain of narration must end with one of the companions of the Prophet. All names
between the one telling the hadith to the hadith collector until the original source, one of the
Companions (mAbpwh4), need to be known as trustworthy and no breaks are allowed within the
chain to be seen as authentic. The narrated itself should be in line with Quran and other known
authentic Ahadieth.

3. Consensus (ijma): This consensus is revered to as ideally the consensus of the Ummah (The
community of Muslims). It finds it basis in the hadith of Mohammed (pbuh) which states:

Allah has protected you from three things: that your Prophet should not invoke a curse
on you and should all perish, that those who follow what is false should not prevail over
those who follow the truth, and that you should not all agree in an error
error. (Dawud; book
35: hadith 4240)
This consensus implicates that the entire Muslim community (Ummah) should be on the same
line on an issue before it can become a source for Shariah. Because if they all agree, following
with the above hadith, which states that the entire community can not agree in an error by the
protection of Allah (swt), therefore they must be right if a consensus is agreed. Later on this
consensus was seen as the consensus of scholars (ulama) of a certain generation in a certain
school of thought/law (Madhab)5. After a consensus is reached this consensus is seen as a third
guideline, next to The Quran and The Sunna. Any consensus which has a historical continuity
from the days of the four Caliphs and the Companions of the Prophet is accepted to be binding.
Any other consensus serves as a strong precedent but one which is nonetheless replaceable by
another consensus. Ijma' (within the limits set by the Quran and the Sunna) provides a
mechanism for the Ummah to undertake legislation collectively on issues and problems it may
face in an ever-changing world, and even venture fresh thinking on past interpretations.
(Khurram, M)

mAbpwh stands for: May Allah be pleased with him (her) an Islamic Arabic phrase asking Allah (swt) to be
pleased with a certain Muslim of significance in Islamic history.
5
In Sunni tradition there are 4 schools of law or thought that are widely accepted all named after their founders:
Hanafi/Maliki/Shafii and Hanbali. These schools are not seen as sects, every Muslim is automatically part of one
school and the schools do not fight each other or deny each others right to exist. (Clark, 2004)

15

4. Analogy (Qiyas): This is the process of analogical reasoning from a known injunction to a
new injunction. So by this fourth source the rulings of Quran and Sunna may be extended to a
new problem if the issue addressed in Quran and/or Sunna and the new issue share the same
cause (illah). The cause is the specific set of circumstances that trigger a certain law into action.
An example of this is the example of alcohol and drugs, alcohol is prohibited in Quran and
Sunna, logically the reason for this is that alcohol intoxicates. Intoxication is bad because it
removes the Muslim mind from mindfulness of Allah (swt) and His rules. Using analogy the
scholars have also prohibited drugs for the same underlying reason, drugs intoxicates and
removes the mind from mindfulness of Allah (swt). Using Qiyas, analogy, several new issues
have been prohibited or allowed in Shariah law.
Qiyas is actually a form of Ijtihad: all exercise of reason and judgment by the scholars to
determine Shariah is called Ijtihad. (Khurram, M) There are other forms of Ijtihad the main
ones are: Istihsan (striving for the good), Istislah (striving for the right), ray (opinion), alurf
(custom) and darurah (necessity). Ijtihad is used as a precursor for Ijma and has to be exercised
within the framework provided by The Quran and the Sunna, this principle has made Shariah
flexible on several issues throughout history. (Khurram, M; Clarke, 2004)

1.2 SHARIAH ON FINANCIAL TRANSACTIONS

hariah has an influence on the everyday live of a Muslim; Shariah also includes several
restrictions on financial transactions. The main restrictions regarding finance and
investment are Shariah rulings on Riba, Gharar (uncertainty) and Maysir (gambling).

The basic principle in Shariah is that exploitative contracts based on Riba or unfair contracts
that involve unnecessary risk or speculation (Gharar) or gambling (Maysir) are un enforceable.
However the Quran does not contain a condemnation of morally acceptable investments that
yield fair/legitimate profits and economic/social added-value. (Siddiqi, 1999) So finance is
permissible as long as it does not contain unjust or unfair components. To make the Islamic
Finance System something that only is interest-free is not correct, one should see the system in
the context of Islam and the broader Shariah as a system that places equal emphasis on the
ethical, moral, social, and religious dimensions, to enhance equality and fairness for the good of
society as a whole (Iqbal, 1997).

16

In the next sections the emphasis will be on the theological outlay of the prohibition of Riba and
on Gharar purely based on Divine authority. Modern day Muslim Scholars always explain and
emphasize this side of the prohibition, but many today also add their rational for the prohibition.
Because one should not only know that something is Haram (forbidden) but should also try to
figure out what the cause (illah) is of the prohibition. The rational, the advantages of an interestfree or usury free world are the same as given throughout history by several non-Muslims, these
will also will be discussed in the last section of this paragraph.

1.2.1 The prohibition of Riba

or 1400 years Muslims and Muslim Scholars have debated and contemplated the
meaning of the word Riba. In this study it is chosen to leave the word Riba untranslated
except in this part where the meaning is discussed. Some Muslims have stated that it

means usury or overcharging; these people argue that the prohibition does not apply to modern
interest. As it does not inhabit an overcharging of interest, as is the case with Usury. However
most Muslim Scholars throughout history of Islamic Jurisprudence (Fiqh) have disagreed with
this view and have determined that any amount above the principal is seen as Riba, and therefore
interest is entirely forbidden, this will be shown later on in the Quran verses. (Kahf, M) The
majority, that claims that Riba is all forms of an extra amount added to the principal, says that
there does not have to be an Ijma (consensus) about it because of the direct prohibition of Riba in
Quran and Sunna. The group that states that modern interest rates are not Riba declare that there
is no Ijma that interest is Riba and therefore there can be no such thing as a prohibition of
Interest.

The prohibition of Riba is unquestioned, but the definition of Riba lies open to debate. This issue
of non-consensus has made it one of the most difficult and most discussed prohibitions in
Islam. Sources going back to one of the Companions of The Prophet (pbuh) declare that Umar
the 2nd Caliph (mAbpwh) said: the verses of Riba are among the very last revealed verses, and
the Prophet (pbuh) died before he fully explained it to us; thus avoid Riba and things that are
similar to it. (Ibn Kathir, 14th century)

17

Among those whom state that the prohibition of Riba does not automatically imply a prohibition
of interest is an organisation of American Muslim Scholars: Minaret of Freedom. They argue
that the word Riba has never been clearly defined and compared the Quranic meaning of the
word Riba to the definitions of interest, usury and overcharging. They conclude that the latter
two are, depending on the context, better translations of the term Riba than the word interest.
According to them the Quranic verses (which are discussed in the next paragraph) about Riba
make four things abundantly clear: (1) It involves amounts which are in some sense large; (2) Its
distinction from legitimate trade is so obvious that only a madman could confuse the two; (3) It
may be contrasted to charity; (4) It is unjust (Imad-ad-Dean Ahmad, 1993).

At the root of the attacks on interest is the assumption that by one standard or another it is
unearned, the capitalist making money without doing something. There is a certain amount of
risk a capitalist takes when investing his money (acting like an entrepreneur) and this is
incorporated in the interest percentage. The problem is that interest not only constitutes this risk,
but also constitutes other factors according to Bhm-Bawerk (1959). He showed that a
substantial part of interest is the time-preference, when an investor does not have the power of
disposal to his funds he suffers a diminution of the subjective value of capital unless a
compensatory interest rate is also offered. If this rate is not offered, the investor suffers a
subjective loss of his capital sum because he is not able to use it and isnt offered any form of
compensation. It is actually this time-element compensation for a subjective loss that the
majority of scholars have said is Riba; any addition to the capital sum (see below). Someone who
lends out money should not do that for personal gain but out of charity towards the needy. But
they are opposed by the libertarian view that the time element is not the defining element of
Riba. According to them the time-compensation is not only Halal within trade, offering discounts
for cash payments or a surcharge for deferred payment, but this is also allowed in financing as
long as there is no overcharging or fine when the debtor is in default (usury). This means that the
interest rate should be in line with the applicable market-interest rate, because if this
compensation is not offered the investor will suffer a subjective diminution of his capital sum
which is seen as Riba, he will get less subjective value back by the deferral (Imad-ad-Dean
Ahmad, 1993).

18

However, as stated before, the above view is not the majority standpoint for Muslims or Muslim
scholars; the majority of scholars think that Riba covers the interest stipulated at the time of the
contract in case of loans as well as the subsequent increases in case the loan or the debt arising
from sale on credit is rolled over because the debtor does not pay it at the time stipulated in the
contract (Badawi, 1964).
In the next pages it will be showed what the main sources of Shariah (Quran and Sunna) say
about this issue and it will become clear how Traditionalist Scholars derive from this sources that
interest is Riba and therefore Haram.

Quran on Riba

s usual in the Quran any prohibition comes in the revealed Text in stages, the
prohibition of Riba is no different than others. The first stage is building moral
resentment against taking Riba:

And whatever you bring in Riba, that it may augment upon (other) persons wealth, then
it does not augment in the Providence of Allah; and whatever you bring in Zakat, willing to
seek the Face of Allah, then those are they who will get (recompense) manifold.
(Quran 30:39)
This verse came to the Prophet (PBUH) several years before the prohibition of Riba, after this
verse other verses were revealed that included a condemnation of Riba as a facet of disobedience
that is a reason to earn the anger of Allah (swt). These verses tell the Muslims about what people
did before them:

So, for the injustice (on the part) of (the ones) who have Judaized, We have prohibited
them good things that were lawful to them, and for their barring from the way of Allah many
(people), And for their taking of Riba, and they were already forbidden it, and eating
(up) the riches of mankind untruthfully; and We have readied for the disbelievers among
them a painful torment. (Quran 4:160-161)

19

This verse speaks of the prohibition of Riba for Jews, and their barring away from it. The Torah/
Old Testament includes a prohibition of Interest or Usury6, but in history it is clear that both
religious groups Jews and Christians have almost entirely given up on this prohibition, this was
so in the time before the Prophet (pbuh) and still is so in modern day economics. Years after this
verse was revealed another verse came to the Prophet (pbuh) which included a final prohibition
of Riba:

O you who have believed, do not eat Riba, doubled (and) redoubled, and be pious to Allah
that possibly you would prosper. (Quran; 3:130)
After the total and complete prohibition of Riba comes the last stage that declares Riba as one of
the gravest sins in Islam and explains better what Riba is. Especially this specific Riba aljahiliyyah; it is the practice that pre-Islam Arabs used when a debtor could not make the payment
date of a debt, the debt was then doubled or redoubled as a punishment for not making the
payments on time. It is the classic case of usury, where the debtor becomes totally dependent on
the lender. This form of Riba can also be seen as the resale of the current debt to the debtor for a
higher price and a longer deferment period (El-Gamal, 2000). Some Scholars have used this
resale of debt to the debtor to prohibit all re-sales of debt, which has large consequences for
commercial banks as the re-sale of debt has become an ordinary practice in western finance.

In the last verses the gravity of the sin is pointed out, it is important because it explains that
Muslims should not take Riba lightly, as described earlier it is one of the most difficult issues in
Islam, for scholars as well as ordinary Muslims. The following verses about Riba where revealed
as last:

The ones who eat (up) Riba will not rise up except as he whom Ash-Shaytan ever smites
with the touch rises up. That is because they have said, Surely selling is only like Riba.
And Allah has made selling lawful, and has prohibited Riba. So he to whom an
6

Many scholars in the western world in the middle ages and even going back to the ancient Greeks were strongly
against interest and usury; Thomas of Aquino, Aristotle, Dante etc. Some used theological reasoning, derived from
the Bible but other also used secular reasons the main one being that money does not have a natural gain. The
Catholic church strongly opposed Usury well into the Middle ages and eventually after the reformers (Calvin and
Luther) interest became a normal thing in the Western world.

20

admonition has come from his Lord (and) so has refrained (in obedience), then he will have
whatever is bygone, and his case is for Allah; and whatever goes back, then those are the
inhabitants of the Fire, and they are therein eternally (abiding). (Quran; 2:275)
Allah expunges the Riba and He augments donations, and Allah does not love every most
disbelieving most-vicious person. (Quran; 2:276)
O you who have believed, be pious to Allah and leave behind what remains of Riba, in case
you are believers. So in case you do not perform (that), then take notice of a war from Allah
and his Messenger (against you). And in case you repent then you will have your capitals
of your riches; you will not do injustice, and you will not be done injustice. And in case any
person is under difficulty, then he should (be granted) a respite to (the time of) ease; and
that you donate (alms) is more charitable for you, in case you know. (Quran; 2:278-280)
In these verses the severity of the sin is described; it is the only sin that contains a notion of war
from Allah and his Messenger for the sinners. There are also several aHadieth about the severity
of the sin and the punishment on devouring Riba which will be discussed later on. Another point
made clear in the above verses is that Riba is seen as unjust and seen as the opposite of giving
charity or donations. Scholars also refer to these verses when they formulate the answer to the
delicate question: Is interest Riba?:

And in case you repent then you will have your capitals of your riches; you will not do
injustice, and you will not be done injustice.
This sentence is the main source for most Scholars and Muslims throughout history to believe
that any excess above the capital (principal) in a lending contract is seen as Riba (Kahf, M). If
one repents from the sin of Riba he will get back his capital sum, he will have suffered no
injustice nor will he inflict injustice. Taking more or less then the capital sum back will mean
that the practice is still Riba and that it either means that he inflicts injustice (increase of the
amount) or means that he suffers injustice (decrease of the amount) (Gamal, 2000). But as
discussed above the libertarian view also uses the same verse to make clear that interest can
21

take away the subjective depreciation of the value of the capital sum, and they say the that if
this depreciation is not compensated the capital sum loses value, which is Riba (Imad-ad-Dean
Ahmad, 1993).

Sunna on Riba

here are several Hadiths on Riba in the hadith collections, some about the severity of the
sin and others about what Riba is:

Abu Sa'id al-Khudri (Allah be pleased with him) reported Allah's Messenger (may peace
be upon him) as saying: Gold is to be paid for by gold, silver by silver, wheat by wheat,
barley by barley, dates by dates, salt by salt, like by like, payment being made hand to
hand. He who made an addition to it, or asked for an addition, in fact dealt in Riba. The
receiver and the giver are equally guilty. (Muslim; book 10; hadith 3854)
Most traditionalist scholars have derived from this hadith using Qiyas (analogy) that money is
also one of these goods that should be traded in equal amounts and hand-to-hand. Gold and silver
are seen as the original currency, the paper money we now have today are seen as the same kind
of currency and therefore the same rules that apply to gold and silver also apply to money (ElGamal, 2000). Any violation of the above hadith will result in one of two forms of forbidden
Riba:
1. Riba al-fadl: increasing the amount of one compensation when trading goods eligible7
for Riba with goods of the same genus immediately with no deferment. (Al-Zuhayli,
2003)

2. Riba al-nasiah: the deferment of a liability in return for an increase (which is also
called Riba al-jahiliyya), or the delay of receiving one of two compensations when
trading goods eligible for Riba for goods of the same genus. (Al-Zuhayli, 2003)
7

Jurists agreed on the prohibition of surplus Riba in the seven goods listed in the Hadith: gold, silver, wheat,
barley, dates, raisins and salt. Thus trading any of those goods for goods of the same genus is forbidden. However
jurists from the schools disagreed over the prohibition of trading in the same genus in different amounts for other
goods:
The Zahiris restricted the prohibition to the listed goods.
The Maliki and Shafii schools restricted the prohibition to monetary numeraire and nutritious and storable
foodstuffs.
The Hanafis and Hanbalis restrict the prohibition to any goods that are measured by weight or volume.
(Al-Zuhayli, 2003)

22

The second one is the one that is common practice in western finance, to repay the lender the
time value of money the borrower makes interest payments. As we have shown this is seen in
Islam as Riba by most Scholars, and this is what the Prophet (pbuh) said about the ones that deal
in Riba:

Ubaidullah b. Abu Yazid heard Ibn 'Abbas (Allah be pleased with them) as saying: Usama
b. Zaid reported Allah's Apostle (may peace be upon him) as saying: There can be an
element of interest in credit (when the payment is not equal). (Muslim; book 10; Hadith
3877)

Abdullah ibn Masud reported The Messenger of Allah (pbuh) cursed the one who
devours Riba, the one who pays it, the one who witnesses it, and the one who documents
it. (Abu Dawud; book 22; hadith 3327)
These Hadiths make clear that it is not only Haram to devour Riba, but also to pay Riba, to be a
witness of it or to be the one that documents it. This has serious consequences for every Muslim,
but especially the ones that do not have the opportunity to engage in Islamic Finance or do not
live in an Islamic country. Because of the important role interest plays in western finance,
economics and daily life it is extremely difficult, to not say impossible, for a Muslim in the
western world to stay away from Riba. Working at a western financial institution or any other
companies for that matter, having a simple savings account, or taking on a mortgage can cause
the Muslim to have internal struggle and conscience issues. That is why Islamic Finance can play
a very important role in the life of Muslims in the West and elsewhere.

Although that interest is considered as Riba and should therefore be avoided according to
traditionalist scholars, there have been some different opinions. Several religious rulings
(fatwas) permit banking interest. The most famous is the ruling of Dr. Muhammad Sayyid
Tantawi (then the Mufti of Egypt), in 1991, permitting all banking interest in all parts of the
world. (Al-Zuhayli, 2003) Some other scholars give some space for the Muslim living in a
western country where there is no form of Islamic Finance. In 1999 there was a council of
respected and well known scholars in Detroit, headed by Dr. Yusuf AlQaradawi, which issued a
legal statement (fatwa) considering and explaining the law of need (al-hajah) concerning
mortgages, see appendix A.
23

Two key points need to be present according to this fatwa before taking a mortgage becomes
permissible for a Muslim. First, all other possibilities for financing in a Halal way are exhausted,
meaning that there are no forms of Islamic Finance available, or other interest-free possibilities
(community, family etc). The second one, the need (al-hajah) is less objective, and can only be
determined or assessed by the concerned person himself. He knows for sure his needs, he knows
what creates hardship for him, what is essential and what is not. One must realize that one is
dealing with Allah (swt) Who knows best and is aware of everything, i.e., things that we keep in
our hearts and things that we reveal. The assessment of hajat (plural of al-hajah) differs from
one person to another; this is correct and natural. Needs that are recognized by the fatwa are: the
need to have a suitable neighborhood to live in, decency, non-involvement in drugs and crime,
good schools, availability of rental housing with comparative cost, availability of housing for
large family, closeness to Muslim and/or non-Muslim peers, the tax effect and the final cost,
building equity, etc. This permission only exists for Housing finance because it is fairly hard to
save for this yourself and housing is a essential part in human life. (Kahf, M islamonline.net)

Another key point is that Muslims should strive as a community to make Islamic Finance
possible in these countries.

1.2.2 The prohibition of Gharar

he best translation of the word Gharar is uncertainty or risk, or the danger of losses.
There are several Hadiths forbidding Gharar sales, and specifying what they are. One
of these Hadiths returned in almost every Hadith collection:

Abu Huraira reported the Prophet (pbuh) prohibited the pebble sale and the Gharar sale.
Lots of classical examples of Gharar were mentioned in the Hadiths. They were mostly about the
sale of products that were not certain like the sale of fish in the sea, birds in the sky, an unborn
calf, a runaway animal, the semen and unfertilized eggs of camels, un-ripened fruits on trees etc.
In all cases it is in the interest of the trading parties to be very specific about what is being sold
and for what price (Gamal, 2000). Another Hadith that specifies Gharar is the next:

24

Abu-Said Al-Khudriy reported that the Prophet (pbuh) has forbidden the purchase of the
unborn animal in its mothers womb, the sale of the milk in the udder without
measurement, the purchase of spoils of war prior to their distribution, the purchase of
charities prior to their receipt, and the purchase of the catch of a diver.
This Hadith explains several forbidden transactions, scholars later derived that the Gharar lies in
the uncertainty regarding these sales. This means that one should try to make the sale as clear as
possible to reduce the uncertainty and both parties know what they are trading. In the case of the
diver for example it means that one can not purchase the catch of a diver for a certain price. But
one can pay a fixed price for a fixed period of time in which the diver will work for the other
party, and whatever the diver finds will belong to the buyer. In this case the object of sale is clear
and well-defined namely the divers labour. In many cases Gharar can be eliminated from
contracts by carefully stating the object of sale and the price to eliminate unnecessary
ambiguities (Gamal, 2000). The higher the risky nature of a transaction the more the trade
becomes similar to gambling (Maysir) which is Haram:

O you who have believed, surely wine and games of chance, and altars (for idols) and
divining are only an abomination of Ash Shaytans doing, so avoid it, that possibly you
would prosper. Surely Ash Shaytans would only (like) to excite enmity and abhorrence
among you by means of wine and games of chance, and to bar you from the remembrance of
Allah, and from prayer. Will you then be refraining? (Quran; 5: 90-91)
The problem with this prohibition, unlike the prohibition of Riba, is that it is relative. A sale is
prohibited only if, in the sale, the major component is Gharar (bayu al-Gharar). On the other
hand, minor (yasir) Gharar does not render a sales contract invalid, because no contract can be
entirely free of Gharar. Thus, the legal scholars differ in determining which contracts are
defective, due to differences in opinion regarding the extent of Gharar inherent in each: whether
it is substantial and invalidates the contract, or minor and retains the contracts validity (ElGamal, 2000).

25

Al Darir (1997) lists four necessary conditions for Gharar to invalidate a contract:
1. It must be major.
2. The potentially affected contract must be a commutative financial contract (this includes
sales but excludes gifts and charitable contributions, including sharing arrangements).
3. The Gharar must affect the principal components of the contract (e.g. the price and object
of sale, language of the contract, etc)
4. That there is no need met by the contract containing Gharar which cannot be met
otherwise.

In contemporary financial transactions, there are two areas where Gharar most profoundly affects
common practice and they are insurance and financial derivatives. It is clear that within the
insurance business the product that is actually sold is unclear and highly uncertain. On the one
hand one might pay lots of money for an insurance policy without ever getting anything back for
it, on the other hand one can also pay for an insurance policy while the cost of, for example, ones
illness is much higher than all of the payments made. This way it remains unclear and uncertain
what will happen. The argument that both parties in the trade, the insured and the insurance
company willingly signed the agreement does not hold, for the same reason a contract between
two gamblers or a Riba transaction is not Islamically correct. The transactions are not based on
justice and equality, nor are they free of bias and ambiguity (AlQaradawi, 2003). More on
Insurance will follow in the paragraph on Takaful in chapter 3.

The second set of relevant contracts which are rendered invalid because of Gharar are forwards,
futures, options and other derivative structures. The uncertainty here is clear and therefore it is
perceived as Gharar and sometimes even Maysir and these financial products are therefore not
permitted by Shariah within Islam. Islamic Finance has come up with some alternatives such as
Salam and Istisna which will be discussed in the next chapter.

1.2.3 Rationale

sury and interest has been around for thousands of years and it seems that during this
time it also has been criticised throughout history by all kinds of religions (Judaism,
Christianity,

Islam,

Hinduism

and

26

Buddhism),

but

also

by

great

philosophers/politicians of ancient times among them Plato, Aristotle, the two Catos, Cicero,
Seneca and Plutarch (Birnie, 1958), and even Modern economists who are/where flat out antiinterest like Silvio Gesell and Margret Kennedy (Visser/ McIntosh, 1998). Because interest has
only become to play a bigger and more important role in everyday life of the modern day man,
and modern day world economics it seems that these critiques should be looked at carefully and
should be taken into account by individuals, groups, communitys and nations when looking at
themselves and the way that their society is built up. The rationale from all these very different
people in different times, from different religions and convictions are very much similar to the
rationale Muslim Scholars give on the Islamic prohibition of Riba today, they can be divided in
several categories for critique:

Usury as unearned Income: One important argument given by the Christian Church at
The Lateran Council in the year 1515: This is the proper interpretation of usury when
gain is sought to be acquired from the use of a thing, not in itself fruitful (such as a flock
or a field) without labour, expense or risk on the part of the lender. Dante later on even
made clear the severity of the sin, putting usurers in the same circle of Hell as the
inhabitants of Sodom and other practisers of unnatural vice (Birnie, 1958). Islam also
envisages that interest is unethical because money does not grow out of itself, if one acts
and puts in effort one can make a profit, but interest is not the result of hard work, it is
predetermined. Aristotle ones said: A piece of Money cannot beget another.
(Visser/Mcintosh, 1998)

Usury as exploitation of the Needy and inadequate way of redistribution of wealth:

Almost all traditions see this as the biggest issue; the one who needs money for survival,
or starting up a good idea, pays an interest rate to the one lending him the money (the
richer one). It has an unethical side to it, recognized by all traditions throughout history
even in modern times; take a look at the Third World Debts and how much of their
current debt consists of the accumulated interest. Despite some Western countries
(especially the welfare states) trying to redistribute the wealth in their economies through
taxes and welfare systems, one of the most clear and at hand systems that redistributes

27

money the opposite way from poor to rich is not seen as unfair or unjust by the
mainstream population. (Visser/Mcintosh, 1998)

Usury as an agent of Economic instability: Gesells (1904) main objection to interest is

that it is an endemic factor in the instability of interest-based economies, i.e. the cycles of
boom and bust, recession and recovery. He stated that interest made it attractive not to
spend money but to save it, causing under spending. Others also see this instability as a
major problem, the rate of interest is not self-adjusting at the level best suited to the
social advantage but constantly tends to rise too high (Keynes, 1936). Modern day
Islamic Bankers and Economists point out that reoccurring crisis situations in economies,
like the present day Financial/ Economic crisis, are incorporated in interest-based
economies; the unnecessary and unethical risks that are taken because of the sheer
availability of capital. (Visser/McIntosh, 1998)

Usury as discounting the future: Interest rates are used to discount future values of cash
flows to Net Present Values. This simple and widely used principle is rarely questioned.
But several critiques have been made on this issue, Pearce and Turner (1990) show that
discounting affects the rate at which we use up natural resources- the higher the discount
the faster the resources are likely to be depleted. Others like Daly and Cobb (1990) add a
logical conclusion and show that discounting can lead to the economically rational
extinction of a species, simply if the prevailing interest rate happens to be greater than the
reproduction rate of the exploited species. A more economic critique but also ethical is
that a consequence of the discounting principle is that in evaluating long term
investment projects, particularly those in which the benefits and costs are separated from
each other with a long time interval, the net present value rules guide the decision maker
to maximise the utility of present generations at the expense of future ones (Kula, 1981).

Maybe it is all of the objections to interest, mentioned above, what Keynes meant when his
biographer (Skidelsky, 1992) comments that: Keyness sense that, at some level too deep to be
captured by mathematics, love of money as an end, not a means, is at the root of the worlds
economic problem.
28

2 ISLAMIC FINANCIAL PRODUCTS

rade is very important for mankind; Islam does restrict certain kinds of trade, mostly
because of the prohibition of Riba and Gharar, but does encourage trade that does not
contain either:

Rafi reported that the Prophet (pbuh) was asked: which are the best forms of income
generation? He (pbuh) replied: A mans labour, and every legitimate sale.
Therefore any financing conducted through valid trading by mutual consent is permissible.
Another important thing is that the Prophet (pbuh) was a trader himself for several years and was
known for his excellence herein. Every sale or contract which does not contain certain specific
Haram conditions is seen as Halal, but because of the fact that most Muslims do not have
sufficient knowledge regarding these various conditions Scholars, jurists and financial
practitioners have limited Islamic Finance to a few named contracts or products. These
contracts have been studied extensively by Islamic law jurists over the centuries, and their
validity is well established through the Prophets (pbuh) own actions (Sunna), or consensus of the
early Muslim communities and jurists (Ijma) (Gamal, 2000). The following paragraphs will
include a extensive and clear description of several Islamic Finance products. These products
encourage risk-sharing, promote entrepreneurship, discourage speculative behaviour, and
emphasize the sanctity of contracts (Iqbal, 1997). They all are permissible under the conditions
given and do not contain any of the already mentioned and discussed forbidden actions (Riba and
Gharar). Even though Islam has formed various ways of financing that are in no form a loan, as
seen below, sometimes a person is forced to take out a loan out of mere necessity. This loan
should then be provided to him by a lender not under the precondition of Riba but out of mercy
and charity. The Muslim borrower should keep in mind that the lender has given him the loan in
mercy and out of charity and should strive to repay the loan as soon as possible because of the
Sunna of The Messenger (pbuh) which states that he had an aversion to debt like in this hadith
narrated by Aisha:

The Prophet used to say, "O Allah! I seek refuge with You from laziness, from geriatric
old age, from being in debt, and from committing sins. (Bukhari; book 8; volume 75; hadith
386)
29

2.1 IJARA (operating lease) and IJARA WA IQTINA (financial lease)

jara is a term that lexically means to give something on rent. The term Ijara is used for
two different situations; in the first place it means to employ services of a person on wages
given to him as a consideration for his hired services. This type of Ijara includes every

transaction where the services of a person are hired by someone else, it has nothing to do with
finance. The second type of Ijara is related to the usufructs of assets and properties, and not the
services of human beings. Ijara in this sense means to transfer the usufruct of a particular
property to another person in exchange for a rent claimed from him. This type is relevant to
finance because it is generally used as a form of investment, and as a mode of financing also
(Usmani, 2000). The sale of a usufruct is permissible in Islam, as evidenced by these verses:

So in case they suckle for you, then bring them their rewards. (Quran; 65:6)
One of the two women said: O my father, hire him, surely the most charitable (man) you
can hire is the one powerful and trustworthy. He said: Surely I would like to marry you
to one of these, my two daughters, on (condition) that you hire yourself to me for eight
pilgrimages. Yet in case you perfect ten, then it will be of your own accord; and in no way
would I like to press arduously upon you. You will soon find me, if Allah decides, one of
the righteous. (Quran; 28:26-27)
There also is an important Hadith on rent or lease;

Sad reported that: We used to lease land for what grew by the streamlets and for what
was watered from them. The Apostle of Allah (pbuh) forbade us to do that, and
commanded to lease it for gold and silver. (Abu-Dawud, book 22: hadith 3385)
The normal Ijara construction is actually a bit different than a normal operating lease
construction, one party, the lessor, has to own the leased object and then transfers the usufruct to
another party, the lessee, for an agreed period at an agreed price while the object stays in the
property of the lessor. The key point is that no middle party, or financer can come into the
transaction, the owner and the lessor need to be the same person or entity, and the user and lessee
also have to be the same, no sub-lease is allowed within Shariah simply because the lessee is not
the owner he is only allowed to benefit from the usufruct. After the lease has been agreed the
30

lessor can (partially or wholly) sell his property to a third person or group of persons whom then
become the lessor and owner. This way the lease can be securitized which may help create a
secondary market for the financiers on the basis of Ijara. For the lessee nothing changes only the
ownership of the property, which means that the lessor has changed. This securitization has to be
done committing to the rules of Shariah; ergo the owner and lessor have to be the same and have
to have the full, or partial to their share, risk of ownership of the property. The same way the risk
of the usufruct has to stay with the lessee for the entire time of the lease agreement. In normal
Ijara the position of Shariah is that at the end of the lease-period the asset is sole property of the
lessor, after the expiry of the lease period the lessor shall be at liberty to take the asset back, or to
renew the lease or to lease it out to another person. If a lease agreement contains a condition that
the property of the asset will be given or sold to the lessee at the end of the period, the agreement
becomes invalid according to Shariah law, unless the agreement is set-up as an Ijara wa Iqtina
(Usmani, 2000).

The Ijara wa Iqtina construction is an Islamic alternative to conventional lease-purchase

agreements. In this contract, a lease is written like the one discussed above, with an additional
promise by the lessor that he will agree to sell the leased object at the end of the lease at a predetermined residual value. This promise should be unilateral and binding for the lessor only, and
the lessee has the option of purchasing the item at the end of the lease, or returning it to the
owner-lessor (Gamal, 2000). This is because if it is a bilateral agreement it is a full agreement of
a sell of an asset on a future date which is prohibited within Shariah. Something else that is
allowed by Shariah according to the scholars is that, instead of a separate promise of sale, the
lessor signs a separate promise to gift the leased asset to the lessee at the end of the lease-period,
subject to his payment of all amounts of rent. This agreement of giving or selling the asset to the
lessee by the lessor should be recorded in a separate contract, it can not be part of the original
Ijara agreement. This is because within Shariah it is a well settled rule of Islamic jurisprudence
that one transaction cannot be tied to another transaction so as to make the former a precondition
for the other that is why the selling or giving of the asset to the lessee should always be a
unilateral one in a separate agreement and should give the lessee the option to buy or receive as a
gift not an obligation (Usmani, 2000).

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2.2 MUSHARAKA (Profit and Loss Sharing)

usharaka literally means sharing, in the context of business and trade it means a
joint enterprise in which all the partners share the profit or loss of the joint venture
(Usmani, 2000). It is the ideal alternative for the interest-based financing

techniques which are prohibited in Islam and is therefore seen as the purest form of Islamic
Finance by many Scholars. The importance of Musharaka is actually not based on a solid juristic
or religious evidence but rather based on the jurists economic reasoning (Gamal, 2000). It is
actually no different from western equity financing, the financier becomes a shareholder of the
enterprise sharing in the profit in a pre-agreed ratio but sharing in the loss in proportion to his
equity participation, that is why another name for Musharaka widely used in the literature is
Profit and Loss Sharing (Zaher and Hassan, 2001).

It seems to be an easy form of Islamic Finance but there are several features that are peculiar and
need to be in a contract before the contract of Musharaka is valid by Islamic Law. The proportion
of profit to be distributed between the partners must be agreed upon at the time of effecting the
contract. The ratio of the profit for each of the partner must be determined in proportion to the
actual profit accrued to the business, and not in proportion to the capital invested by the partners.
It is also not allowed to fix a lump sum amount for any one of the partners, or any rate of profit
tied up to his investment (Usmani, 2000).

The proportion of the profit allocated to the partners in the contract cant exceed their actual
contribution in the enterprise according to 2 schools of thought (Maddhab) within Sunni Islam
formulated by their founders Imam Malik and Imam Shafii. Imam Ahmed Hanbali disagreed
with them, his view and of the school is that the ratio of profit may differ from the ratio of
investment if it is agreed between the partners with their free consent. Imam Abu Hanifa,
founder of the Hanifa school of thought, presented a third view which can be seen as the middle
way between the two above, he says that the ratio of profit may differ from the ratio of
investment in normal conditions. However, if a partner has put an express condition in the
agreement that he will never work for the Musharaka and will remain a sleeping partner
throughout the term of Musharaka, then his share of profit cannot be more than the ratio of his
investment. In the case of loss all the imams and schools of thought are in consensus (Ijma), each
32

partner shall suffer the loss (which is not limited to their invested funds) exactly according to the
ratio of their investment. This means that the liability in Musharaka is unlimited, if the liabilities
of the business exceed its assets and the business goes in liquidation, all the exceeding liabilities
shall be borne pro rata by all the partners. Unless they have agreed that no partner shall incur any
debt during the course of business, then the exceeding liabilities shall be born by the partner
alone who has incurred a debt on the business in violation of the condition. (Usmani, 2000)

Another point where the Schools of Thought differ is the nature of the invested funds, Imam
Malik and some Hanbali jurists view is that liquidity of the capital is not a condition, therefore
the investment of a partner can be made in kind, but the share will be determined in accordance
with the market price prevalent at the date of the contract. Imams Abu Hanifa and Ahmad
Hanbali do not agree and are of the view that no contribution in kind is acceptable in Musharaka.
Imam al-Shafii makes a difference between some commodities that can be part of Musharaka
and other that can not. Usmani (2000) mentions in his view that for Imam Maliks view is the
simplest and most reasonable one and that it meets the needs of modern day Finance. The normal
principle of Musharaka is that any of the partners has a right to take part in its management and
to work for it. However the partners may agree upon a condition that the management shall be
carried out by one of them, and no other partner shall work for the Musharaka. In this case the
sleeping partner(s) should be entitled to the profit only to the extent of their investment, and the
rate of the profit allocated to him should not exceed the ratio of his investment.

The termination of a Musharaka agreement, in history and in jurisprudence, has been at the
request of one of the partners. If the assets are in cash form they are divided between the partners
in accordance with their ratio of investment. If the assets are not liquid they should be sold or the
other partners can agree with the partner who wants to sell on a price. This way the Musharaka
can live on without being terminated, especially in modern day economics, continuity of a
Musharaka is of huge importance for its success. Usmani (2000) states that this can be resolved
with a condition in the Musharaka agreement that the liquidation or separation of the business
shall not be effected unless all the partners, or the majority of them wants to do so, and that a
single partner shall have to sell his share to the other partners and shall not force them on
liquidation or separation. In his view there is no bar from Shariah point of view if the partners
33

agree to this by mutual consent at the beginning of the Musharaka. The big advantage of such a
condition is that long term projects with large amounts of investments involved can not be
terminated at the arbitrary of one of the partners causing the Musharaka great loss, loss to the
other partners and even to society if the Musharaka is liquidated or separated. This condition is
supported by the general principle laid down by the Prophet (pbuh):

All the conditions agreed upon by the Muslims are upheld, except a condition which
allows what is prohibited or prohibits what is lawful.
One model of financing which is based on Musharaka, is a form where the financing agency and
the customer share the ownership of real estate. This is mainly known as Musharaka
mutanaqisah (diminishing partnership). In contrast to the Ijara model (leasing), where ownership
remains with the lessor as described above, ownership in diminishing partnership is explicitly
shared between the customer and the Islamic Financial Institution. The periodic payments made
by the customer contain two parts: (i) a rental payment for the part of the property owned by the
Islamic Financial Institution, and (ii) a buy-out of part of that ownership. Over time, the portion
of the asset which is owned by the customer increases, until he owns the entire asset and needs to
pay no more rent. This is slightly different than the Ijara-wa Iqtina agreement where the lessor
gives the lessee the option to buy the asset at the end of the lease-agreement at a predetermined
price. The diminishing partnership looks a lot like a normal mortgage schedule, in the beginning
the rent part of the payments will be bigger, later on (as more payments have been made as buyout) these rent payments will get smaller as the customer will gain more ownership and ergo will
pay less rent for the ownership of the financier.

That the payments can be easily seen as, or be compared with, normal interest based mortgage
payments does not matter and can even be an advantage. The difference between the two is
simply in the contract, one is forbidden (interest based) and the other is not (Musharaka), but that
they can easily be compared gives the devout and intelligent Muslim the chance to know for
certain that he is not paying an excessive price to the Islamic Financial Institution (Gamal, 2000).

34

2.3 MUDARABA (limited partnership)

he difference between Musharaka and Mudaraba is that in Mudaraba the investment

does not come from all partners, as in Musharaka, but only comes from one partner
who is called the rabb-ul-mal (financier), while the management and work is an

exclusive responsibility of the other partner, who is called mudarib (agent). It is comparable to
the western style limited partnership, where the investor provides the capital while the other runs
the business and profit is distributed based on a negotiated percentage of ownership. In case of a
loss, the investor earns no return or a negative return in its investment and the agent receives no
compensation for his effort. It is actually a trust based finance agreement where profits are based
on a pre-agreed on ratio (Zaher and Hassan, 2001). The key of the matter is the Trust part.
Within Shariah the agent can not be held accountable for a loss because he did not invest
anything except his time and effort. But this principle is subject to a condition; that the agent
(mudarib) has worked with due diligence which is normally required for the business of that
type. If he has worked with negligence or has committed dishonesty, he shall be liable for the
loss caused by his misconduct or negligence (Usmani, 2000).

Another difference between Musharaka and Mudaraba is that liability for the single investor
(rabb-ul-mal) in a Murabaha agreement is limited to his investment, unless he has permitted the
mudarib (agent) to incur debts on his behalf. Another difference is that in Musharaka all partners
own the enterprise, in Mudaraba the enterprise is solely owned by the rabb-ul-mal, and the
mudarib can earn his share in the profit only in case he manages the enterprise profitably. He is
not entitled to claim a share in assets themselves, even if their value has increased; he only has a
share in the profit occurring by the usufruct of the assets.

It is necessary for the validity of Mudaraba in Shariah that the parties agree, right at the
beginning, on a definite proportion of the actual profit to which each of them is entitled. No
particular proportion has been prescribed by Shariah; rather it has been left to their mutual
consent. However in Mudaraba like in Musharaka the same condition about lump sum amounts
of profit is made. They cannot allocate a lump sum amount of profit for any party, nor can they
give a ratio on the investment, the ratio must be made on the profit only. This also means that the
mudarib (agent) can not claim any periodical salary or a fee or remuneration for the work done
35

by him. The contract of Mudaraba can be easily terminated by either of the two parties, the only
condition is to give notice to the other party. If all assets are in cash form the investor gets his
capital back and any remainder is divided by the ratio agreed upon. If the assets are not in a
liquid form, the mudarib shall be given the opportunity to sell or liquidate them, so that the
actual profit may be determined (Usmani, 2000).

The Muslim jurists differ in opinion if a time limit may be set for the end of the Mudaraba
agreement. The Hanafi and Hanbali schools are of the view that the Mudaraba can be restricted
to a particular term. By contrast Shafii and Maliki schools are of the opinion that the Mudaraba
agreement can not be restricted to a particular time. However this difference of opinion is only to
the maximum time limit of the Mudaraba. A minimum time limit is not directly discussed by the
schools, but it seems that no such limit can be fixed. Each party is at liberty to terminate the
contract whenever he seems fit. This unlimited power is again difficult for modern day business,
because a new business venture simply needs time to become profitable. They also demand
constant and complex efforts; therefore it may be disastrous to the project, if the rabb-ul-mal
terminates the Mudaraba right in the beginning of the enterprise. Especially the mudarib can
suffer a severe set back, earning nothing despite all his efforts, which is not good for society as a
whole because it can lead to the downfall of entrepreneurship of the poor. Therefore Usmani
(2000) is of the opinion that the parties can agree on a minimum time the Mudaraba shall not be
terminated, because it does not violate any principle of Shariah, as a result of the hadith of the
Messenger (pbuh):

All the conditions agreed upon by the Muslims are upheld, except a condition which
allows what is prohibited or prohibits what is lawful.

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2.4 MURABAHA (cost-plus sales)

urabaha is, in fact a term which refers to a specific type of sale, a seller agrees with
the purchaser to provide him a specific commodity on a certain profit added to his
cost. The seller should expressively disclose his actual cost for the commodity and

then add some profit thereon, this profit may be in lump sum or may be based on a percentage.
This Murabaha sale was initially only used in trade, the payment of the agreed price (with the
mark-up) could be made at the spot or can be made later on, by deferred payment. Most banking
transactions made today in Islamic Banking are Murabaha contracts and most contain a deferred
payment which makes it a financing tool. This is actually not necessary in a Murabaha
transaction (Usmani, 2000).

Murabaha in its original Islamic connotation, is simply a sale, not a mode of financing. The only
feature that distinguishes it from other kinds of sale is that the seller in Murabaha expressly tells
the buyer how much costs he has incurred and how much profit he is going to charge. The ideal
mode of financing according to Shariah is Mudaraba or Musharaka which have been discussed
earlier. However, in the perspective of the current economic set up, there are certain practical
difficulties in using these instruments in certain areas of financing. Consumer loans and
mortgages for example are not easily financed through Musharaka or Mudaraba. Therefore the
contemporary Shariah experts have allowed Murabaha as a financing method subjected to
certain conditions. These conditions draw a clear line between an interest bearing loan and a
transaction of Murabaha and are added in this thesis as appendix B (Usmani, 2000) because they
are too extensive to be summarized here. The legal difference between Murabaha and an interest
bearing transaction is clear, one is a sale in which price is increased for deferment (profit) and
the other is an increase in the amount of a debt for deferment (interest). The first is permitted the
second one isnt, this means that as long as a commodity is bought from a seller, and the price is
deferred making the seller the debtor, it is permissible to increase the price (debt) with a certain
lump sum or percentage. This kind of transactions become very similar to interest on consumer
loans but as long as the seller and the debtor are the same person or entity (A) which sells for a
certain price with a clear mark-up for deferment to the buyer (B), it is not considered the same. If
the debt comes from another person or entity (like a bank) the deal becomes 2 separate
transactions, one a simple trade with the owner A who sells to the buyer B (which is allowed).
37

Added to this is the Financing from C to B which is simply a debt including interest payments
which is Haram (Gamal, 2000). As we noted above financing with Murabaha in deferment
creates a debt, and with debt comes the risk of default, therefore it is allowed within Shariah to
ask for a collateral (Siddiqi, M.N. 2004).

2.5 SALAM AND ISTISNA (Islamic forwards)

he permissibility of Salam and Istisna are exceptions to the general rule of Shariah that
prohibits forward sales because of the Gharar (uncertainty) in them (non existing
objects) as explained earlier. Salam is a forward that has very strict conditions and is

only allowed because of the following hadith:

Ibn Abass narrated: The Messenger of Allah (pbuh) came to Medina, and found its
inhabitants entering in salam contracts (with the price paid in advance) in fruits for one,
two and three years. He (pbuh) said: whoever enters into a salam contract, let him specify
a known volume or weight, and a known term of deferment. (Bukhari; book 3; hadith 455)
Salam is a sale whereby the seller undertakes to supply some specific goods to the buyer at a
future date in exchange of an advanced price fully paid at spot (Usmani, 2000). It was allowed
by the Prophet (pbuh) subject to certain conditions. The basic purpose was of this sale was to let
small farmers, who needed money, to sell their future crops, so that they could feed their
familys, buy the seeds etc until the time of the harvest. After the prohibition of Riba these
farmers could not take usurious loans anymore but still needed the money. Similarly some
traders used to take loans for their import and export business needing more cash than they had.
By using Salam these traders could sell their goods in advance, so that they could engage in the
trading business. Salam was beneficial to both seller and buyer because the buyer paid less then
he would pay in a normal trade and the seller got his money in advance so he could engage in
other transactions or survive.

Some conditions should be held into account when dealing in Salam contracts, the most
important is that the price should be paid in full at the time of effecting the sale. This is because
the basic wisdom behind the permissibility of Salam is to fulfill the instant needs of the seller. If
the price is not paid to him in full, the basic purpose will be defeated. Salam can only be affected

38

in those commodities where the quantity and quality can be specified exactly. Both the quality
and the quantity need to be specified as clearly as possible leaving no ambiguity which may lead
to dispute. Salam cannot be effected on a commodity or on a product of a particular field or farm.
This because there is a possibility that the particular field or farm will not deliver any such
commodity through a drought or a disaster. The same rule is applicable to every commodity the
supply of which is uncertain. The date of delivery must be specified in the contract.
The way modern day Islamic banks deal with Salam is after buying a commodity by way of
Salam they sell it through a parallel contract of Salam for the same date of delivery. The period
of Salam in the second transaction is shorter then the first, making the price a little higher than
the price of the first transaction. That way an Islamic Financial Institution can make a profit on
the Salam contracts without actually having to make use of the commodity involved. Or they can
get a third party to promise to purchase the commodity at the specified date from the institution,
this should be a unilateral promise from the expected buyer. Another way is of actually trading
as a commodity dealer in a special cell by the institution, although institutions will be reserved
on this point (Usmani, 2000).

Istisna is a second kind of sale where a commodity is transacted before it comes to existence,
jurists reasoned by analogy (qiyas) and preference (istihsan) from the permissibility of Salam to
that of Istisna (Gamal, 2000). It means to order a manufacturer to manufacture a specific
commodity for the purchaser, the contract creates a moral obligation on the manufacturer to
manufacture the goods, before he starts the work the agreement can still be unilaterally canceled
after he starts, it cannot be cancelled only when the two parties agree. It is necessary for the
agreement, to be valid by Shariah, that the price is fixed with the consent of both parties and that
necessary specification of the commodity (intended to be manufactured) is fully settled between
them (Usmani, 2000). Price does not have to be fully paid in advance with Istisna as is the time
of delivery more flexible if the parties agree however the purchaser may fix a maximum time of
delivery. The payment can even be deferred past the delivery date; the manufacturer can also
make a parallel agreement with another manufacturer that he will manufacture it. This will make
the original manufacturer a financier, who outsources the real manufacturing process but
remaining responsible for the manufactured (Usmani, 2000).

39

Istisna is a very flexible way of financing within Shariah, for example the buyer can agree on an
Istisna with an Islamic Financial Institution that they will manufacture a house for him at a
certain price, with certain requirements paid at a certain time in the future or a schedule. The
Islamic Financial Institution can now outsource the actual manufacturing process in another
Istisna agreement to a real-estate developer. He will actually manufacture the house at a certain
price (lower than the original one), after the house is finished it is delivered to the financial
institution who then delivers it to the original buyer. The price will be paid as was agreed by the
two parties, in whatever manner they wished (Usmani, 2000). Several other projects can be
financed that way, for example if a government wants to construct a highway, it may enter into a
contract of Istisna with the builder. The price of the Istisna can be agreed upon, for example it
may be the right of the builder to operate the highway and collect its toll for a certain period of
time.

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3 OTHER ISLAMIC PRODUCTS

aving discussed how a Muslim can Finance his activities in chapter two this chapter
will concentrate on what a Muslim can do with his money when wanting to invest it
in a Halal manner. Logically all products discussed permissible as a financing tool

are also permissible as an investment tool, making the Muslim the other party of the agreements.
Next to this there are also more common ways of investing money for a Muslim:

3.1 EQUITY AND INVESTMENT FUNDS

ommon shares in a listed company are allowed within Shariah although this depends
on the companys business. The common share is allowed within Islam because it
contains a claim on the ownership equity, this in contrast to bonds or preferred stock

because they contain a claim on the companys interest-baring debt or in the case of preferred
stock which is a hybrid stock/bond. The investors can pool their funds in so-called Islamic
mutual funds. These funds can then be managed and invested in a portfolio of permitted stock,
buying and selling them when they see fit. These portfolios of diversified stock of several
different companys can be pooled in manners suited to the objectives of the mutual fund;
growth in value over time, short term profit, etc (Siddiqi, M.N. 2004).

With the proliferation of Islamic mutual funds and other investment instruments, the industry
realized the need for indexes specially designed for Islamic investors. The Dow Jones Islamic
Market Indexes intend to measure the global universe of investable equities that pass screens for
Shari`a compliance. The family includes regional, country, industry and market-cap-based
indexes, all of which are subsets of the Dow Jones Islamic Market (DJIM) Index.
(www.djindexes.com)

This means that Muslims are allowed to own common stock, receive dividends and trade in
stocks if certain conditions are met. The selection of the businesses is twofold first they exclude
companies whose primary business involves forbidden Haram products and therefore are not
allowed in Shariah; alcohol, gambling, pork, cigarettes, weapons industry, financial services and
entertainment. The financial service industry here means the sectors whom owe their right to
41

exist solely on the dealing in interest for example the banking sector. But almost all companies in
the Modern world deal in interest in some way. Here the second selection process comes in,
which is more arbitrary then the first.

Because the remaining stocks would not be enough, if all companies dealing in interest were to
be excluded, to appropriately diversify the pool in the stock indices the jurists have
compromised on the strict rules of Shariah especially concerning the (interest) Riba prohibition.
This because most listed companies fall in 2 kinds of categories, either they have regular
liquidity shortages in which case they borrow money with interest. This is the largest group this
also comes because of the tax-benefits from financing with debt. Or the companies have regular
surpluses, in which case they invest this extra liquidity in interest-bearing instruments.

The rules set by Shariah boards linked to the several Islamic Stock Indices concerning the
equity shares are: 1. The main business of the company is not violative of Shariah. 2. If the main
business is Halal but the company deposits their surplus amounts on an interest bearing account
or borrow money on interest, the shareholder must express his disapproval. 3. If some income of
interest-bearing accounts is included in the income of the company the proportion of such
income in the dividend paid to the shareholder must be given in charity; purification. 4. The
shares of a company are only negotiable if the company owns some illiquid assets, some say at
least 51% of total assets should be illiquid, others say 33%. (Usmani, 2000)

Some of these rules seem arbitrary, as if they are not based on sound religious principles and
although Shariah scholars have a certain amount of influence within the Muslim community, the
individual Muslim always remains responsible for his/her own actions. No matter how educated
and prominent a fatwa issuer is, he remains human. So a Muslim must always keep in mind that
he is not allowed to absolve himself from his religious responsibility by following the opinion of
a scholar if he is convinced otherwise (Gamal, 2000).

According to T. Usmani (2000) if all the conditions are met, Islamic Equity Funds can be
established on this basis. The subscribers to the fund will be treated in Shariah as partners inter
se. All the subscription amounts will form a joint pool and will be invested in purchasing the
42

shares of different companies. The profits can either accrue through dividends distributed by the
relevant companies or through the appreciation in the prices of the shares. In the first case
purification (Zakah) is obligatory, for the capital gain due to appreciation in price the Scholars
disagree.

The management of the fund may be carried out in two different ways, the managers may act as
mudaribs for the subscribers. In this case a certain percentage of the annual profit accrued to the
fund may be determined as the reward for the management. This means that management will
only get its share when there is profit. The second option for the management is to act as an
agent for the subscribers. In this case the management will be given a pre-agreed fee for its
services. This may be fixed in a lump sum or as a monthly or annual remuneration. However it is
necessary in Shariah to determine any one of the aforesaid methods before the launch of the
fund (Usmani, T. 2000).

3.2 FIXED INCOME FUNDS

hese are funds that are created for investors who need to invest in income generating
vehicles but at minimal risk. Or for creating a balanced portfolio of high risk (stocks)
and low risk investments for example for retirement plans etc. The majority of

conventional fixed income investments (government bonds, money market accounts, etc) include
the forbidden Riba (El-Gamal, 2000). That is why two kind of funds are also available within
Islamic Finance, one of them the Ijara fund, which has already been mentioned, and the other
commodity funds.

Ijara means leasing and is discussed in paragraph 2.1, with an Ijara fund the subscription
amounts are used to purchase or build assets like real-estate, motor-vehicles or other equipments
for the purpose of leasing them out to their ultimate users. The ownership of these assets remains
in the fund and the rentals are charged from the users. These rentals are the source of income for
the fund which is distributed pro-rata to the subscribers. Each subscriber is given a certificate to
evidence of his ownership of his share of the fund, these certificate are called sukuk, and are
similar to bond certificates except that they represent the ownership of their holders in the
43

tangible assets of the fund and not the liquid amounts or debts, therefore they are fully negotiable
and can be sold and purchased on a secondary market. Anyone who purchases these sukuk
replace the sellers in the pro-rata ownership of the relevant assets managed by the fund and all
the rights and obligations of the original subscriber are passed on to him. The price of the Sukuk
can thereby fluctuate and will be determined on the basis of market forces, and are normally
based on their profitability. However it should be kept in mind that Shariah conditions for Ijara
which were discussed earlier need to be upheld (Usmani, T. 2000). The advantage of this Ijara
fund is that the fixed income will move up with inflation and its risk is relatively low and is
comparable to the forbidden conventional fixed income investment risk: e.g. the default in the
conventional contract vs. default and repairs and or losses of assets in the lease fund (El-Gamal,
2000).

A commodity fund may be another possible type of Islamic Fund, the subscription amounts are
used in purchasing different commodities for the purpose of their resale. The profits generated by
the sales are the income of the fund which is distributed pro-rata among the subscribers. Several
conditions are to be kept in order for such a fund to be Shariah compliant: 1. The commodity
must be owned by the seller at the time of the sale, short sales are prohibited by Shariah. 2.
Forward sales are not allowed unless the comply with the rules for Salam and Istisna contracts
(see 2.5). 3. The commodities must be Halal. 4. The seller must have physical or constructive
possession over the commodity he wants to sell. 5. The price of the commodity must be fixed
and known to the parties. Any price which is uncertain or is tied up with an uncertain event
renders the sale invalid. If the trade of the commodities by the fund comply with these conditions
the fund is permissible and the units of such a fund can be traded on a secondary market, with the
condition that the portfolio owns some commodities at all times (Usmani, T. 2000).

44

3.3 TAKAFUL (permissible insurance)

he prohibition of Gharar (uncertainty), as explained in paragraph 1.2.2, is the reason

why the majority of Islamic jurists have prohibited insurance policys as used in
Modern day society. According to those jurists commercial insurance is invalid,

because insurance complies with the four necessary conditions for Gharar to invalidate a contract
as given in the paragraph on Gharar. All four conditions are met by insurance according to
contemporary scholars (El-Gamal, 2000):
1.
2.
3.
4.

The Gharar is argued to be quite substantial, since the amount to be collected from the insurance company
may vary between zero and a very large sum.
The commercial insurance contract is a sale contract, which is a commutative financial contract.
The Gharar affects the object of sale, and therefore it is integral to the contract.
The cooperative insurance alternative can meet the needs that are met by commercial insurance.

Moreover, since many insurance contracts also include an investment component (e.g. certain
types of term and life insurance), the insurance companies investments in interest-bearing bonds
render such contracts invalid based on the prohibition of Riba. Insurance is an important way of
risk reduction but isnt the only method, it is widely known that diversification schemes can
simply reduce risks. As a matter of fact, the Islamic alternative way of insurance, the notion of
cooperative or mutual insurance (Takaful) is based precisely on the same logic of diversification
(El-Gamal, 2000).

In cooperative insurance, a group of subscribers contribute to a pool of funds. Whenever one of

the members makes a legitimate claim (relative to the specific form of cooperative insurance to
which they subscribed), they draw money out of the pool. In the meantime, the funds are
invested in an Islamic manner without exposing the policy holders to any extra significant risk.
Unclaimed profits are then distributed among the policy holders (El-Gamal, 2000).

45

In another form of Islamic insurance, the Gharar issue is solved by making the insurance a
partnership of the insured which make donations to a insurance pool of funds necessary
conditions are (Al-Qaradawi, 2003):
1.

2.
3.

4.

Each subscriber will make a donation in the fund and when one of the members makes a legitimate claim
(relative to the specific form of cooperative insurance to which they subscribed), they draw money out of
the pool/company.
If money that accumulates and is not (yet) necessary by any of the subscribers is invested it should be
invested in a Halal way, avoiding the several prohibitions.
It is not allowed that a subscriber donates, on condition, that in case of a disaster he will receive a
predetermined lump sum. He will rather receive an amount, that will cover his loss or part of it, depending
on the amount of cash the cooperation has to its disposal.
What is paid as a donation by the donor is a gift and a gift can not be reclaimed because that is Haram.

Although Islam states that Insurance companies are reprehensible in their current Modern form
and approach, Islam is not against the principle of insurance; on the contrary, it only opposes
their means and methods. Insurance policies that are not in contradiction with Islamic forms of
business transactions would be welcomed by Islam. An Islamic society would also provide for
this insurance either with mutual help between civilians, or through the government and the
treasury, this because the treasury, in an Islamic state, is the universal insurance policy for
everybody within the Islamic domain (Al Qaradawi, 2003).

46

4 GOAL, CONDITIONS AND CRITIQUE OF ISLAMIC FINANCE

he previous chapters have laid down the fundamental injunctions that a Muslim should
follow when dealing with finance. The easiest way to have Shariah compliant
financing is at a Islamic Financial institution. Such a institution functions by collecting

funds and investing them on behalf of their participants. Their goals are rebuilding the Islamic
society and the realization of Islamic cooperation while adhering to the fundamental Islamic
laws. They also aim to help assist the needy through interest-free loans, as well as supporting the
socio-economic foundations of an Islamic society. (Al-Zuhayli, 2003)

It is very important to keep in mind that in theory a Islamic Financial institution should be
different from normal commercial institutions, unfortunately in practice this sometimes is far
from the case! It is imperative that such a institution highlights the differences between regular
and Islamic Finance. For that reason Al-Zuhayli (2003) sums up a small list of features that
distinguish Islamic Financial institutions from their conventional counterparts:
1.

Those institutions adhere closely to the Islamic creed (aqidah). Since they are first and foremost Muslim
institutions, they share the fundamental Islamic drive to avoid what Allah (swt) has forbidden.

2.

Islamic financial institutions endorse the principles of mercy and forgiveness when clients face financial
difficulties.

3.

The primary goal is not profit-making, but the endorsement of social goals of socio-economic development
and the alleviation of poverty. They provide interest-free loans to the needy families, serve in the
distribution of Zakah8 to the poor and for education and religious centers.

4.

They provide more transparency in their dealings, since the depositors monies are invested in specific
projects that are known to all.

5.

Depositors in Islamic Financial institutions derive profits from the actions of the institution and its legal
agents. Thus the capital provider is a partner in the bank either through a silent partnership (Mudaraba) or a
general partnership (Musharaka).

6.

Islamic Financial institutions aim to provide their services to all economic groups, while conventional
banks are not accessible to the poorer classes.

7.

They try their best to assess their commissions and fees in line with the actual costs of the services they
provide.

Zakh or "alms for the poor" (Arabic: IPA: [zkh] is the Islamic principle of giving a percentage of one's
income to charity. It is the duty of the Islamic state not just to collect Zakat, but to distribute it fairly as well. Zakat
is one of the Five Pillars of Islam. (www.wikipedia.com)

47

These conditions and higher goals of an Islamic Economy (including Finance) are, as said, in
practice often reduced to a minimum, this has led to heavy critique on Islamic Finance (and
institutions). Mainly due to the fact that they are applied within the classical economic system
and are represented as an alternative. In effect the aim is to achieve the same results in terms of
economic stimulation, efficiency, return, and profit- while avoiding practices seen as unlawful
(Haram) to Islam. Islamic Finance suggest a series of reforms of the techniques and modalities
of transactions at the heart of the classical system, which they do not question in its essence, but
which on the contrary they confirm both in its philosophy of productivist profitability and in its
global domination. (T. Ramadan, 2009)
The prohibition of some means or techniques should be understood in the light of this general philosophy: the texts have
confirmed and allowed some practices (ownership, trade) and have prohibited others (interest, speculation) in the light of the
higher goals of ethics. Communities, firms, or economic functionaries should be aware of that and try to achieve those outcomes
rather than simply being content with making techniques lawful (Halal) while aspiring to the same profit levels and soulless
consumerism. The point is, of course, not, in the name of spiritual disposition or idealistic ethics, to advocate an economic
activity that would turn its back on efficiency and profitability (which are the natural and essential driving forces of trade) but
rather to associate ethical conscience with economic action, its source and origin, to questions its goals, intentions and
priorities. (T. Ramadan, 2009)

Another important critique on the practice of Islamic Finance is the lack of use of Profit and Loss
Sharing (PLS) agreements, such as Musharaka and Mudaraba (See paragraphs 2.2 and 2.3). This
sharing in profits and losses by the institution and the needy consumer plays an important role in
theoretical Islamic Finance, as will be shown, but does not in practice. In practice other Islamic
principals mainly cost-plus sales (Murabaha, discussed in paragraph 2.4), lease (Ijara in 2.1) and
forward sales (Salam and Istisna, 2.5) are used as financing instruments. (Dar and Presley, 2000)

This lack of PLS is, according to several theories, mainly due to the moral hazard problem that
these PLS contracts incorporate. In theory, a Muslim (or any ethical person) will not withhold
information from another person or organisation with whom he has a profit sharing agreement,
however in practice this is a risk that institutions are not willing to take. Management and control
is not redundant in the real world, Islamic banks persist in taking the easy and risk averse route
and avoid profit and loss sharing contracts. Until the incentive to cheat is eliminated, the desire
to withhold information must be negligible and systems must be put in place which allow
efficient and open profit and loss share instruments to develop. (Dar and Presley, 2000)

48

FACTORS DETERMINING ATTITUDES TOWARDS ISLAMIC

FINANCE

fter extensively discussing and explaining Islamic Finance it is time to take a look at
the literature available on factors that determine the attitude towards Islamic Finance
of the individual consumer. This is because before Islamic Finance, as described

above, can become a competitive way of Finance in the Netherlands, it is imperative to get a
better understanding of why a Muslim would choose for an Islamic (or interest-free) financing
system in stead of staying with conventional finance products, to satisfy their financing need.
Unfortunately little research has been done on this subject in The Western World (only in the
UK), there have been some empirical researches in Muslim countries (Malaysia, Singapore and
in several Middle Eastern countries) but even this is relatively small compared to the vast work
on consumers perceptions, patronage and satisfaction with conventional banking services (Gait
and Worthington, 2007). The degree of research done in this area is disappointing considering
that business theory states; that understanding and adopting to customer motivation and
behaviour is not an option but an absolute necessity for competitive survival (e.g. Kotler, 1998;
Engel, Blackwell and Miniard,1995), and this thesis hopes to help fill this gap.

5.1 COMMERCIAL BANKING

he research towards conventional banking has generally brought forth several theories
on this consumers attitudes, especially concerning selection criteria and customer
satisfaction. Because of the increasingly competitive environment in which

conventional banks operate consumer satisfaction has become the focus of increasing attention in
recent studies. Generally there is a consensus among many studies that service quality is the
primary factor in customers satisfaction with conventional bank services (Taylor and Baker,
1994; Levesque and McDougall 1996; Jamal and Nasser, 2002). Other studies on selection
criteria towards conventional banks find a large number of important motivations for choosing a
certain bank. Among them are: the convenience of a bank (Kaynak and Whiteley, 1999)
including location and service quality (Wel and Noor, 2003; Lee and Marlowe, 2003), the banks
reputation and image (Kennington, 1996; AlMossawi, 2001) and profitability factors such as

49

low service charges and high interest rates according to Ta and Har (2000) and Kaynak and
Harcar (2005) ( in Gait and Worthington, 2007).

5.2 ISLAMIC FINANCE

he research done on consumers attitudes, patronage and satisfaction in association

with Islamic Finance or banking has brought forth several theories, although not so
widely documented as conventional banking. At this point it would be helpful to fully

discuss the researches that try to pinpoint the underlying reasons that determine the attitude
towards Islamic Finance.

Erol et al. (1989;1990) conclude that religion is not the primary motivation for customers dealing
with Islamic Banks in Jordan. More important factors are a fast and efficient service, the banks
reputation and image and confidentiality. They also found that there was no impact of religion on
bank selection criteria and that there were significant differences between patrons of
conventional banks and Islamic banks in their pricing policies. Jalaluddin and Matwally report
similar findings (1999); religion is not the only factor that motivates small-businesses in
Australia to use profit/loss sharing methods of finance, the probability of borrowing funds on a
profit/loss sharing basis increases when business risk or interest rates are high. Expected rate of
return and degree of intervention in management are considered more than financing in a
profit/loss sharing system (Gait and Worthington, 2007). Similar conclusions were made when
comparing Muslim and Non-Muslim perceptions in selecting commercial bank services in
Malaysia, a decade after Islamic finance became available in Malaysia, with the start of Bank
Islam Malaysia Berhad in 1983. Both Muslim and non-Muslims who patronized commercial
banks had a common perception in selecting their banks. With this information, the religion
factor should not be emphasized by any Islamic bank, according to this research, because only
40% of the Muslims patronizing commercial banks believe that religion is the main factor in why
people maintain an Islamic account. More than half of both respondent groups have indicated the
possibility of establishing a relationship with an Islamic bank if they have a complete
understanding/ higher awareness about the operations of an Islamic Bank.

50

Another study in Jordan (Naser, Jamal and AlKhatib, 1999) concluded that the most important
factors determining attitudes towards the Islamic bank were the banks reputation and then
religion. However a majority of the customers deal with both the Islamic as well as a
conventional bank this to make use of various products and facilities. The vast majority of the
customers of the Islamic bank were satisfied with the banks products and services and most had a
high level of awareness of at least some Islamic methods of finance. A small minority was found,
which did not have any awareness of Islamic principles, this in contrast with Gerrard and
Cunningham whom found a large portion of Muslims in Singapore having no awareness in their
study (1997). This could indicate that in a country were there is no Islamic bank (Singapore did
not have an Islamic bank); awareness among Muslims is low, when an Islamic bank enters the
market the Muslims become more educated in Islamic Finance like in Jordan, by the bank but
also by Islamic organizations. This better understanding should mean that the demand of
customers for Islamic products will increase. (Haron, Ahmad and Planisek 1994)

Another research that emphasizes the importance of awareness of Islamic principles among
customers was a survey among 300 customers of Islamic Banks in Bahrain. Their findings were
that most Islamic bank customers are satisfied with Islamic banks services especially investment
accounts. A large portion of the customers were well educated and between the ages of 25-50.
The most important factor in the bank selection process among the customers was religion
(adherence to Islamic principals) then profitability, thirdly the recommendation of family and
friends and last convenience of location. Most customers were well aware of fundamental
Islamic terms, and were not satisfied with more complex financing schemes. This suggests that
these schemes were to complex and that procedures and true costs needed to be more clarified
(Metawa and AlMossawi, 1998).

In another survey conducted in Malaysia, among Muslim consumers, the findings where that the
Muslim users of Islamic products are much more favourable towards Islamic banking compared
to the non user. A bigger proportion of the users was married, financially stable and above 25.
Whereas non users were predominately singles, under 25 and financially less stable. It was also
common among users that religion, spouse, other relatives and friends had an impact on attitudes
towards Islamic bank products (Zainuddin et al, 2004). The importance for Muslims of third
51

parties such as; spouse, relatives, friends and media for their bank selection criteria was much
bigger than for non-Muslims in a study by Gerard and Cunningham (1997).

Many other

significant differences were found comparing the results between non-Muslim and Muslims. For
example, Muslims were far more of the opinion that religious and profitability reasons motivate
people to deposit money with an Islamic bank; more strongly agreed that granting of interest free
loans by Islamic banks helped the community in a just and efficient manner; were more likely to
deposit an unexpected sum with an Islamic bank and were much of the opinion that borrowers
benefit by being granted loans that are not charged a pre-determined rate of interest. In the
context of bank selection criteria, only some significant differences were noted. For example,
Muslims placed relatively lower importance on the need to be paid a high rate of interest on their
savings. Muslims and non-Muslims agreed on fast and efficient service and confidentiality as
being primary factors in selecting bank services.

The outcome of a survey held in Turkey among Islamic bank customers was that most
respondents agreed that religion was the primary reason for the use of Islamic products, a
secondary motivation was the interest-free principle. Most customers were aware of basic
Islamic products and services, but not of more advanced techniques. More than 90% of the
respondents were satisfied with the services and products offered by Islamic banks (Okumus,
2005).

One research in the UK in 2003/2004 tried to quantify the demand for Islamic financial services,
differentiating in three types of attitudes towards Islamic Finance; staunch believers in the
prohibition of interest whom are expected to never enter into interest-based transactions, pentup customers whom consider religious and other factors and are expected to switch to Islamic
finance if it is competitive enough, and conventional customers whom are reluctant to use
Islamic finance particularly if it is more costly. This attitude is more important for the demand
then all the bank selection criteria discussed in the other researches as the researcher argues:
That a switch from conventional to Islamic banking will only occur because of the belief that interest is prohibited and, hence,
should be avoided. Although awareness of Islamic financial institutions and the products offered by them influence the decision
to switch but perhaps it is more important that the individual is convinced that the institutions and products operate in conformity
with Islamic principles. (Dar, 2003)

52

The results of the research were that three factors, namely education, occupation and income are
significant positive determinants of demand for Islamic financial services. The three are also
interconnected; the higher the education, the better the occupation and the higher the income, and
the higher the demand for Islamic financial services. Other factors like age, gender, ethnicity and
marital status are not statistically significant. Overall 3/4 of UK Muslims are at best indifferent to
Islamic Finance, implying that demand may not be a purely religious phenomenon. Thus
providers of Islamic Finance should not put a significant large premium on Shariah compliance
that in itself is questioned by a majority of Muslims (83% of the surveyed). While this perception
(of un-Islamicity) may very well be because of widespread unawareness of Islamic finance
amongst Muslims, nevertheless it is an important issue. Increasing the awareness of benefits of
switching from conventional banking to Islamic finance can push up the demand (Dar, 2003).

To conclude a study in the Netherlands by Bouissaghouane and Oahalou (2003) determined that
77% of the sample (n=90) had a positive stance towards Islamic banking. The sample of this
research consisted of mostly young Muslims under 35 (more than 70%), mostly males (70%) and
50% was of Moroccan descent. About 79% where personally concerned about the lack of Islamic
Finance. A large portion (84%) of the respondents indicated that they would like to place their
finances with a Shariah compliant institution and 54% indicate that they would even use
Shariah compliant products if they were uncompetitive. This study also finds that the demand
for housing finance is the largest (64%) followed by business financing (38%) and car financing
(34%). They also find that the potential market for Islamic Finance in the Netherlands is
considerably large, due to the disposable income (approximately 2,5 billion) and the wish of
43% of Moroccan and Turkish households to own their own house, implying a possibly huge
Halal mortgage market.

53

5.3 CONCLUSIONS
Combining all the theory, although some researches contradict one another, results in the
following list of determinants of the attitude towards Islamic Finance:

Religiosity

Attitude towards the Riba prohibition

Awareness and knowledge of Islamic Finance principals and products.

Education

Income

Age

Marital status

5.4 CONCEPTUAL FRAMEWORK

n the present paragraph the previously mentioned factors that come forth out of the
literature review are combined into a single conceptual framework. This framework wants
to predict the attitude of a Muslim towards Islamic Finance using the underlying

determinants.

Each of the indentified determinants will be briefly discussed in a single paragraph containing
some supporting theory. Finally the hypothesis regarding its expected relationship with the
dependent factor attitude towards Islamic Finance will be stated.

5.4.1 Religiosity
As was mentioned by several researches one of the determinants of the attitude towards Islamic
Finance is the religiosity factor (Okumus, 2005; Zainuddin et al, 2004; Metawa and AlMossawi,
1998). In this research the choice has been made to divide the religiosity factor into two factors:

1. The inner sense of Religiosity;

2. The actual (practise) Religiosity;

54

Theory states that although young Muslims in the Netherlands do not participate in religious
practice (actual religiosity) as much as the first generation, their inner sense of religiosity almost
matches up to the elderly (Phalet and Haker, 2004). Theory also states that the degree of
orthodoxy of young Dutch Muslims of Turkish and especially Moroccan origin has increased
over the last couple of years (Entzinger and Dourleijn, 2008).

These two religiosity variables are expected to be interconnected and are expected to both be
strong determinants of the attitude towards Islamic Finance.
H1a: The stronger the inner sense of Religiosity of Muslims the more positive the attitude towards Islamic
Finance.
H1b: The higher the actual (practice) Religiosity of Muslims the more positive the attitude towards Islamic
Finance.

5.4.2 Attitude towards Riba prohibition

Dar (2004) states that the only reason why a Muslim will consider transferring from conventional
Finance to Islamic Finance is the belief that interest is Riba. If one does not believe interest is
Riba, one will be reluctant to switch to Islamic Finance. The more one believes that interest is
Riba the more one will be inclined to make this switch:
H2: The stronger the belief that Interest is Riba (and therefore Haram) the more positive the attitude towards
Islamic Finance.

5.4.3 Awareness and knowledge of Islamic Finance principals and products

According to theory the level of knowledge of the principles and awareness of the products is
generally low among individual consumers, especially among immigrant communities and
countries with an Islamic finance system yet to be established (Gait and Worthington, 2007).
Both these factors are existing in the Netherlands, so it is expected that awareness among
Muslims in the Netherlands is generally low. This level of knowledge gets better, according to
theory when the respondents are more educated, are more strong believers in the prohibition of
interest and when Islamic products are available, this because the banks and organizations
increase awareness.
H3: The higher the awareness and knowledge of Islamic finance principles the more positive the attitude
towards Islamic Finance.

55

5.4.4 Education and Income level

These factors are highly interconnected and are both expected to be important determinants of
the demand for Islamic Finance (Dar, 2004). Theory also states that the higher the level of
education the higher the use of Islamic Finance will be (Metawa and AlMossawi, 1998). It is
logical and fair to assume that the higher the education level the higher the income will be, so
that education level is the strongest determinant. But Zainuddin et al (2004) find that most users
of Islamic Finance are financially stable therefore the income will also be incorporated in the
research. Based on these findings the following 2 assertions can be made:
H4a: The higher the education level the more positive the attitude towards Islamic
Finance will be.
H4b: The higher the income level the more positive the attitude towards
Islamic Finance will be.

5.4.5 Age and Marital status

Zainuddin (2004) states that a big proportion of users of Islamic finance products are above 25
and married, while non users are mostly non-married and under 25. It is also concluded that the
opinion of the spouse (and also other relatives) has an important influence on the use of Islamic
Finance. The following hypothesis are derived:

H5a: The higher the age of a Muslim the more positive the attitude towards Islamic Finance.
H5b: If a Muslim is married it is expected that his/her attitude towards Islamic Finance is more positive.

56

5.4.6 The conceptual model

Several possible predictors of the attitude towards Islamic Finance have been identified in the
preceding paragraphs. Their effect on the dependent variable are each proposed in several
hypotheses. These hypotheses together form a model containing certain characteristics that
predict the attitude of a Muslim towards Islamic Finance. A researcher or the government or
another interested party can use this model to indentify determinants and may even choose to try
to have an effect on certain determinants (if Muslims let themselves be influenced).

The

resulting conceptual model is displayed below in figure 1.

Figure 1: Conceptual Model What determines the attitude of Muslims towards Islamic Finance.

*
Religiosity
1. The Inner religiosity
2. The Actual religiosity

*
*

Awareness of Islamic
Principles

Attitude towards Interest

Prohibition

Income

Marital Status

Education

Age

57

Attitude towards Islamic

Finance

6 METHODOLOGY

his chapter will provide a comprehensive overview of the methodology that was used
to research the questions and hypothesis posed in the previous chapters. First the
research design will be discussed. Second a description of the survey and the process of

its administration will be given.

6.1 RESEARCH DESIGN

The research question of this study is: What is the Attitude towards and interest in Islamic
Finance of young Muslims and what factors determine them? To examine this issue several
determinants of this attitude were found in related researches from around the world. Some of
these determinants were easy to measure and some were difficult, but an extensive questionnaire
was made using several disciplines of knowledge (sociology, marketing, theology etc). Using
this knowledge a quantitative research design was possible.

The research required the collection of enough primary data from young Muslims through a
survey. The goal of this survey was to capture the attitude of individual young Muslims towards
Islamic Finance and try to determine what factors influence this attitude.

The population
According to the CBS (2007) there were 944.000 Muslims in the Netherlands in 2004,
representing 5.4% of the entire population. This number has increased relatively fast from
566.000 (3,7%) in 1993 not because of massive conversion among the Dutch but because of the
migration of Muslims to the Netherlands, the higher birth rate among Muslims and the
reunification of family and partner import. Because of the use of a new calculation method the
CBS concludes that they have overestimated the number of Muslims because of the fact that a
certain percentage of the immigrants from Muslim countries, do not see themselves as Muslim,
mainly because of secularization. The new number of Muslims according to the CBS in 2006 is

58

857.000 (5.2% of the entire population). Most Muslims (94%) are non-western allochtonen9,
the largest groups of Muslims are Turks (325.000) and Moroccans (260.000). Smaller groups of
Muslims come from; Surinam, Iran, Afghanistan, former Yugoslavia and Somalia (Phalet and
Haker, 2004).

6.2 DATA COLLECTION

6.2.1 The questionnaire and the questionnaires administration
The questionnaire (Appendix E) was constructed by the researcher in consultation with several
other Muslims to get a clear picture of the factors expected to influence the attitude of Muslims
towards Islamic Finance.

To reach enough Muslims in a fast and efficient way, the questionnaire was administered online.
The choice for a internet survey was made because of the convenience it offered for both
respondent and researcher. Before the invitations for the survey went out, a pre-test was
conducted in order to make sure all the items were clear, easy to understand and to makes sure
the survey was not to long. The successful test of the survey showed that the survey was ready
for distribution. Most of the respondents were contacted trough the use of Muslim (student)
organizations and the network of the researcher.

The respondents were invited to fill in the questionnaire online whenever he/she felt like it, with
the promise that it would only take a couple of minutes to fill it in. A big advantage for the
researcher was that internet is a good and easy way to distribute a survey. It also minimizes the
socially desirable answers as it is completely anonymous. A downside is the fact that it is
impossible to calculate the response rate because it is impossible to know the exact number of
people who got the invitation e-mail sent to them (because of forwarding). The survey was
online for about 3 months and resulted in a sample of 132 respondents.

According to the CBS a inhabitant of Holland is an non-western allochtoon when at least one of his two parents
are born in Turkey, any country in Africa, Latin America and Asia (with exception of Indonesia and Japan).
(definitie allochtoon, CBS 2000)

59

Downsides of the internet survey are the selection bias, the response was mostly young Muslims
with easy access to Internet. This however was not a problem due to the fact that it was the goal
to get information from young Muslims. Of course the non-response bias was a problem, in the
invitation spread among Muslim organizations, key figures, own network, etc the topic Islamic
Finance was mentioned. It is plausible that people with a strong attitude towards Islamic Finance
were more willing to take the time to fill in the questionnaire.

The survey tried to get a representative sample of the young highly educated Muslims in the
Netherlands as described before. Mainly it was important to have sufficient response from the
two largest groups, Turks and Moroccans. The representative ness of the survey will be
discussed later on with the description of the sample.

6.3 DATA CLEANING

Before proceeding to the analysis the consistency of the dataset was ensured. The false or
missing responses and data entry errors where located and corrected.

6.3.1 Outliers and Missing values

Due to the fact that the questionnaire was extensive it was expected that some respondents did
not fill in all the questions. A visual inspection of the dataset showed that a total of 16
respondents failed to complete most of the questionnaires items. Every respondent with several
missing values (especially towards the end of the questionnaire) was removed from the dataset.

Subsequently a frequency analysis for all items was performed. That way all questions that were
not answered by all remaining 116 respondents could be located. The missing values found were
not systematic for those respondents, so these respondents remained in the dataset.

Because of the automatic input of the data from the internet survey, by the electronic form of the
questionnaire, there was no room for outliers as most of the questions were multiple choice. Only
the age and the nation of origin were open for outliers due to type errors or something else,
however after inspecting the sample no outliers were found. There were some nations of origin

60

and ages that were rare in the sample but it was chosen to retain them in dataset. Because of the
fact that the Muslim population in the Netherlands does have specific minority origins, and the
research does not want to exclude any of them.

6.3.2 Inconsistencies
The final step of the data cleansing was the inspection of the respondents answers to the
reversely coded items. To see how consistent the respondents were, a control on the internal
accordance of the answers in similar questions, which were coded differently, was necessary.
Two statements were reversely coded, but no inconsistent response was found, all respondents
answered the questions consistently.

6.3.3 Recoding reverse coded items

The questionnaire contained two reversely coded statements that were recoded afterwards so that
they would be positively correlated to the variable (construct) that they measured. The two
statements were:

I am not very active with my religion.

I do not feel strongly connected with Islam.

6.3.4 Conclusion
The examination of the dataset in terms of its consistency, led to the removal of several
respondents because of several errors and systematic missing values. This removal resulted in a
clean sample of 116 respondents, on the basis of which the research results are presented in the
coming chapters.

61

7 SURVEY

n this chapter a detailed account of the statistical analysis of the data collected from the
sample (n=116) is given. It will give useful insight in the samples demographics and
characteristics, the reliability of the scales constructed and the validity of the formulated

hypothesis are researched. In order to validate the created conceptual model that identifies the
factors whom determine the attitude of Muslims towards Islamic Finance.

7.1 UNIVARIATE ANALYSES

7.1.1 Demographics
As mentioned before the sample consists of 116 respondents, the demographics asked for in the
survey are presented below.

Age, gender and civil state of sample.

The age mean of the sample is 26,3 years with a standard deviation of 7.3. The majority (92%) of
the respondents are within the age group of 18 40 years. The majority of the respondents are
unwed, this most likely due to the low average age of 26,3. There are a bit more male
respondents than female, but this difference was only small (53% vs 47%). These demographics
were expected due to the data collection method used. Most respondents were contacted threw emailing the social network of the researcher whom also is of that age group.
Table 1 Demographics (Age, gender and civil state)
Variables
Age

Age groups

Gender
Civil state

Values
Mean

26,3

Standard Deviation

7,3

- 18

3%

18-23

37%

24-30

43%

31-40

12%

>40

5%

male

53%

female

47%

wed

23%

unwed

77%

Sample N=116

62

Native country
In the survey the respondents were asked about their origin and of their mothers and fathers, this
to find out of what ethnicity they are and whether they were 1st generation or 2nd generation
immigrants. Most respondents are born in the Netherlands (63%) and are therefore 2nd generation
immigrants or ethnically Dutch, 37% are 1st generation immigrants of which the largest group
are Moroccan immigrants (28%).
A large portion (66%) of the respondents are of Moroccan origin (whether 1st generation 28% or
2nd generation 38%) secondly a group are of Dutch origin 10% (or third generation immigrants
which does not show from the survey results) 11% are of Turkish origin and 5% are originally
ethnically Surinam. Further there were some other origins namely Afghanistan, Iran, Indonesia
and Pakistan.

These results were expected due to the data collection method that was used. The respondents
were mostly contacted from within or through the social network of the researcher whom also is
of Moroccan descent.
Table 2 Demographics Native Country
Variable

Values

Variable

Values

Variables

Values

Native
Country

Netherlands 63% Native Country Mother Netherlands 12% Native Country Father Netherlands 10%
Turkey

4%

Turkey

10%

Turkey

11%

Morocco

28%

Morocco

66%

Morocco

66%

Surinam

1%

Surinam

5%

Surinam

5%

Afghanistan

1%

Afghanistan 1%

Afghanistan

1%

Iran

1%

Iran

1%

Iran

1%

Belgium

1%

Belgium

0%

Belgium

0%

Brasil

1%

Indonesia

3%

Indonesia

3%

Somalia

0%

Pakistan

1%

Pakistan

2%

Education and Gross Income

Most respondents are highly educated (81% HBO or WO) which was expected due to the data
collection method, but the gross income is not similarly high among most respondents. It seems
as if the income of the respondents does not match the expected income when looking towards
the education level. The most likely explanation is the low average age of 26,3 years (40% below
63

23), which could mean that a lot of respondents have not finished their higher education (yet), or
have just started their careers and are therefore not earning as much as one would expect; 53,1%
earning less than 15.000.

On the other hand 30,5% of the respondents indicate that they earn more than 30.000 a year,
which is above the average income of the Netherlands (CPB, 2008), indicating that they are
financially stable and an important group concerning Finance.
Table 3 Demographics education and gross income
Variable

Values

Variable

Values

Education

none

0,9% Gross Income

<10.000

37,4%

vmbo/mavo

2,6%

10.000-15.000

15,7%

havo/vwo

3,4%

15.000-20.000

5,2%

mbo

12,1%

20.000-30.000

11,3%

hbo

40,5%

30.000-40.000

23,5%

wo

40,5%

>40.000

7,0%

7.1.2 Riba Prohibition and Awareness on Islamic Principles

As mentioned before one of the important

minority that is present among Muslims as

predictors of the attitude towards Islamic

well as Muslim scholars (see discussion in

Finance is the attitude of a individual

paragraph 1.2.1). Another small portion

Muslim towards the Riba prohibition and the

(4%) of the respondents indicate that they

inclusion of modern day

have no idea. (see figure 2)

interest in this

prohibition. Therefore respondents were

asked about their stance on this particular
prohibition.

As

was

expected

most

respondents feel that interest is Riba (almost

90%) although at the same time almost 50%
of the respondents indicate that it is
impossible to completely abide by this
ruling. A little more than 6% of the
respondents does not feel that interest is
Figure 2

Riba, as indicated before it is a small

64

The awareness on Islamic Principles was

measured by 2 separate variables, the first one

Figure 3

measuring the own assessment of the knowledge

on Islamic Principles regarding Finance (Mean=
0,47 and st.dev= .841) and the second one
asking about the knowledge of the respondent
on several Islamic Principles. Looking at the
response to the first variable (figure 3) one sees
that more than 55% of the respondents judges
their own knowledge on Islamic Finance as poor
or very poor, another 32% judges their own
knowledge as neutral and only 12% judges their
own knowledge as good or very good.

Figure 4

The second variable measured the real

knowledge on certain Islamic Principles of
the individual. The maximum number of
principles known was 7, the mean of only
0,78 indicates that knowledge on Islamic
Principles is very low on average within the
sample. (see figure 4)

65

7.1.3 Attitude towards Islamic Finance

Finance. (see figure 5) These findings are

Positivity towards Islamic Finance

more or less in line with the findings of

The attitude towards Islamic Finance of the

Bouissaghouane, M. en R. Oahalou (2003).

respondents was measured in this study by 3

Figure 5.

variables. One variable is the Positivity

towards Islamic Finance, the results of the
survey were that the majority (57,8%) of the
respondents

totally

agreed

with

the

proposition My feelings towards Islamic

Finance are positive (mean= 3.28 and
st.dev= .974). Another 18% agreed to this
proposition. Meaning that a total of 75% of
the

respondent

were

positive

towards

Islamic Finance. A mere 6% had a more

negative stance towards Islamic Finance and
almost 19% were neutral towards Islamic
Lack of Islamic Finance is Bothersome

Finance is not bothersome at all.

Another variable which measures the same

Figure 6

attitude towards Islamic Finance is the

reaction to the proposition I find the lack of
Islamic

Finance

in

the

Netherlands

bothersome (mean= 2.98, st.dev= 1.185).

Here one also sees the skewness towards the
totally agree answer, almost 50% of the
respondents totally agree with the statement.
Nearly 14% agrees with the statement, 26%
has a neutral stance on the matter. A little
over 10% feels that the lack of Islamic

66

Figure 7 Number of Islamic Products Interesting

The last variable that measured the attitude

(or demand even) of the respondent towards
Islamic Finance is the question Which
Islamic Products will u use in the future, if
they become available?. Several Islamic
Products were named and for the variable
Islamic Products interesting these products
were added up and were counted up to a
maximum of 10 products. The mean is 5,71
and a standard deviation of 3,66, meaning
that the average respondent was interested in
5,71 Islamic products. However, as seen in
figure 4, 36 of 112 respondents were found
to have interest in all products, and only 11
respondents did not have any interest in
Islamic Products at all.
Table 4 Interest in Islamic Products

Islamic
Islamic

Islamic

Islamic

Islamic

life

Current

Savings

insurance

account

account pension

no

45,5%

31,2%

32,1%

37,5%

19,6%

54,5%

52,7%

42,0%

60,7%

53,6%

yes

54,5%

68,8%

67,9%

62,5%

80,4%

45,5%

47,3%

58,0%

39,3%

46,4%

Islamic

Islamic

Housing Consumer
finance

credit

Damage
Islamic
investment

Islamic

Islamic

Healthcare Continuous

Business

insurance

Financing

credit

It is also important to take a look at the specific Islamic Products that Muslims are interested in.
The interest in all Islamic products is high (above 40%), especially the interest in; housing
finance (80%), current account (69%), savings account (68%) and Islamic pension funds (63%).
This high interest is in line with the positive attitude of Muslims towards Islamic Finance. It
seems that there is enough interest in Islamic financing products to at least research the
possibilities to introduce Islamic Finance in The Netherlands further.

67

7.1.4 Conclusions
As described above a large portion of the sample are interested in Islamic products, only 11
(N=112) are not interested in Islamic Finance at all. It is also important to note that 75% of the
respondents have a positive attitude towards Islamic Finance and more than 60% of the
respondents find the lack of Islamic Finance bothersome. It is also very important to state that
90% of the respondents were interested in at least one Islamic Product.

The sample of 116 respondents consists of mainly young, highly educated, ethnically divers
Muslims, although a large portion (66%) either are 1st or 2nd generation Moroccan immigrants.
Consequently, the results of the following data analysis can be generalized to a Muslim
population with these characteristics. However the demographics of this sample represent a very
important market share for a possible Islamic financial institution. It should be noted that elderly
Muslims are often 1st generation immigrants with low education levels and low incomes, and are
therefore not interested but also (financially) incapable to engage in new financial transactions. It
seems as if this group is not an important target group for (Islamic) financial institutions. On the
other hand young, highly educated individuals are at the beginning of their (financial) career,
with a high income prospect and several very important life (financial) decisions to come
(housing, pension etc). They are in my view the most important target group within the Muslim
community for (Islamic) financial institutions.

7.2 SCALE EVALUATION

The scales which were used in the survey measured 1-dimensional constructs according to
relevant literature or the knowledge of the researcher. However these scales measured the
constructs in different contexts which resulted in lots of variables. In order to identify underlying
components, or factors, that explain the pattern of correlations within the set of observed
variables a factor analysis was performed per scale. This way data is reduced and a small number
of components (one for each scale) explain most of the variance found in the original variables.

Some of the original variables were left out of the factor analysis, this because they measured
constructs that are not mentioned in the conceptual model. These additional variables will be
68

discussed later on when recommendations are made for parties whom are considering starting up
a Islamic Financial Institution in the Netherlands.

7.2.1 Factor Analysis

The internal variables of the scale Practice were found to be significantly correlated10, the AntiImage correlation of the items in this scale scored a MSA of above 0.55 and therefore the tests
indicate that factor analysis is applicable. PCA was used as method of extraction, 1 component
was constructed explaining 50,1% of variance within the scale. The component was named:
Actual religiosity. The variables of the scale Attitude towards Islamic Finance were found to be
significantly correlated11, the Anti-Image correlation of the items in this scale scored a MSA of
above 0.65 and therefore the tests indicate that factor analysis is applicable. PCA was used as
method of extraction, 1 component was constructed explaining 61,0% of variance within the
scale. The component was named: The attitude towards Islamic Finance. The variables of the
scale Knowledge of Islamic Finance were found to be significantly correlated12, the Anti-Image
correlation of the items in this scale scored a MSA of 0.5 and therefore the tests indicate that
factor analysis is applicable. PCA was used as method of extraction, 1 component was
constructed explaining 71,5% of variance within the scale. The component was named:
Awareness of Islamic Principles. The variables of the scale Religiosity were found to be
significantly correlated13, the Anti-Image correlation of the items in this scale scored a MSA of
0.8 and therefore the tests indicate that factor analysis is applicable. PCA was used as method of
extraction, 1 component was constructed explaining 63,7% of variance within the scale. The
component was named: Inner Religiosity.

After the factor analyses Cronbachs alpha was calculated for each of the 4 components. Two
components scored high reliability (Inner religiosity and Actual religiosity) and two components
displayed an acceptable reliability (Attitude towards Islamic Finance and Awareness of Islamic
Principles). (see Table 4)

10

KMO=.753, Bartels Test of Sphericity: x= 286,862 p=.00

KMO=.626, Bartels Test of Sphericity: x= 55,076 p=.00
12
KMO=.500, Bartels Test of Sphericity: x= 23,061 p=.00
13
KMO=.901, Bartels Test of Sphericity: x= 528,090 p=.00
11

69

Table 4: Factor Analysis results (only factor loadings > .30 are presented) Rotated Component
Matrix

Component loadings

Component Items

Component1

Component 2

Component 3

Component 4 Communality

Practice
Prayer

,733

,537

Praying Fadjr

,837

,701

Mosque attendance

,889

,790

Collective Friday Prayer

,864

,746

% of Variance Explained

50,168%

Attitude towards Islamic

Finance
Positivity towards Islamic
Finance
Lack of Islamic Finance
Bothersome
Interest in Islamic products

,846

,715

,741

,549

,752

,566

% of Variance Explained

60,998%

Knowledge of Islamic
Finance
Own assessment of knowledge
of Islamic Finance
Knowledge on Islamic
Principles

,846

,715

,846

,715

% of Variance Explained

71,526%

Religiosity
Religiosity

,889

,791

(R)Activity in Religion

,621

,386

Importance of Muslim Identity

,864

,746

Proudness of Muslim Identity

,898

,806

(R) Connection with Islam

,889

,790

Self image as Muslim

,861

,741

% of Variance Explained

63.656%

Name of Variable

Actual
Religiosity

Attitude towards
Islamic Finance

Awareness of
Islamic
principles

Inner
Religiosity

Reliability (Cronbachs alpha)

= ,753

= ,654

= ,581

= ,882

70

7.3 BASIC DATA ANALYSIS

This study desires to identify factors that determine the attitude of potential (Muslim) customers
towards Islamic Finance. The present section analyzes the relationships between the independent
variables since this will help facilitate the subsequent analysis of the survey result. The variables
will be analyzed in terms of Pearson correlation (r). The correlation matrix is presented in table 5
and the significant and interesting findings are discussed below.

As expected Age is positively correlated with Gross Income, since the older one is the higher
the gross income is, especially the fact that lots of students participated in the survey. Age is
also positively correlated with the Native country of the respondent, a possible explanation is
the older the respondent is the bigger the chance that he/she is a first generation migrant. The
negative correlation with the Civil state is due to the fact that people are more likely to be
married when they are older.

To continue, the negative correlation between the Gender and the Attitude towards interest
prohibition and the Awareness of Islamic Principles are particularly interesting. Women
significantly show more strictness (more think that interest is Riba) and show more interest
avoiding behavior than men. But they have less Awareness on Islamic principles. There is also
a significant negative correlation between Gender and Actual Religiosity. This could indicate
that women are less religious in their practice, but the logic explanation is the fact that the
component Actual Religiosity consists of the following variables: Prayer, Praying Fadjr,
Ramadan, Mosque attendance and attending Collective Friday Prayer. A problem with this
construct is the fact that women are not obliged to attend Collective Friday Prayer or visit
Mosques, as men are. The variables Mosque attendance and Collective Friday Prayer were
inspected and women scored lower on both variables than men. Therefore when looking at this
construct one should bear in mind that women score significantly lower by the definition of the
construct not because of the fact that they practice Islam less than men. Another interesting
finding is the fact that women respondents have lower Gross income and are more often married.

71

Another interesting finding is that Education is positively correlated with the Attitude towards
the interest Prohibition. This could indicate that more educated Muslims are more often of the
opinion that Interest is not Riba and especially more often give the answer that they have No
idea. This is in line with the contemporary complexity related to the Riba Prohibition among
Muslims throughout history, mentioned in paragraph 1.2.1.

Furthermore, the Inner Religiosity of individual Muslims is highly positively correlated with
the Actual Religiosity. This was expected, due to the fact that both constructs measure the
Religiosity but on different levels one inner and the other outer. The Inner and Actual
Religiosity are also both negatively correlated with the Attitude towards the interest
Prohibition. This indicates that the more religious one is, the more strict one is in the
interpretation of the Riba prohibition in relation to modern day interest.

The final interesting finding is that Actual Religiosity is also positively correlated with the
Awareness of Islamic Principles, this could indicate that the more practicing a Muslim is the
more aware he/she will be on Islamic Principles regarding finance.

72

Table 5: Correlation-matrix (r)

Age
Age
Gender
Education
Gross Income
Civil state
Inner Religiosity
Actual Religiosity
Awareness of Islamic
Principles
Riba Prohibition
Native Country
Native Country
of Mother
Native Country
of Father

Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.
Pearson Corr.
Sig.

Gender Education

Awareness
Gross Civil
Inner
Actual
Of Islamic
Income state Religiosity Religiosity Principles

Native Native
Riba
Native
Country Country
Prohibition Country of Mother of Father

1,00
-,116
,219
,021
,823
**
,490
,000
**
-,313
,001
-,148
,115
,038
,688
,088
,351
,034
,720
**
,308
,001
,055
,558
,033
,732

1,00
-,035
,710
*
-,192
,040
*
-,209
,025
,053
,576
**
-,352
,000
*
-,199
,033
*
-,207
,026
-,145
,119
,065
,490
,002
,986

1,00
,083
,379
-,054
,565
,041
,666
,003
,971
,044
,640
*
,226
,015
,004
,964
,017
,853
,062
,511

1,00
-,123
,193
-,134
,154
-,107
,255
-,029
,759
,131
,163
**
,245
,008
-,092
,330
-,088
,354

1,00
,064
,498
-,099
,291
-,071
,450
,122
,193
-,043
,651
-,103
,276
-,127
,180

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).

73

1,00
**

,421
,000
,036
,700
**
-,469
,000
-,015
,873
,000
,996
-,023
,812

1,00
**

,268
,004
**
-,463
,000
-,054
,562
-,081
,388
-,034
,720

1,00
-,149
,111
,095
,313
,022
,815
,148
,117

1,00
,119
,205
,100
,287
*
,227
,015

1,00
**

,363
,000
**
,246
,008

1,00
,742
,000

**

1,00

7.4 REGRESSION ANALYSES

The regression analyses which follows will reveal any existing relationship between the 8
independent factors identified and the dependent factors (Positivity towards Islamic Finance,
Lack of Islamic Finance bothersome and Interest in Islamic Products) combined in the
construct Attitude towards Islamic Finance in regression model 1. Regression model 2
discusses the results for the dependent variable Interest in Islamic Products. This variable is
discussed separately because of the importance to quantify the interest in Islamic products and
the factors that influence it. In appendixes C and D the two other dependent variables will also be
discussed separately for the curious reader.
Before proceeding with regression analysis, all predictor variables which were not in a scale
measure (i.e.: Gender and civil status) were transformed in respective dummy variables so that
the multiple regression analysis could be applied. Consequently one gender and one civil status
dummy variables have been created considering as baseline condition Male and Unwed.

7.4.1 Regression model 1 (Dependent variable= Attitude towards Islamic Finance)

The results of the first regression model, which included all cases, indicated three variables as
significant predictors of the construct Attitude towards Islamic Finance (see table 6).
Specifically: Awareness of Islamic Principles, Riba Prohibition and Age. The standard error
of the estimate of the attitude towards Islamic Finance in this regression model is SEE= 0,852.
Table 6: Multiple Regression Analysis Results Model 1.
Unstandardized
Coefficients
B

Std. Error

1,787

,663

Actual Religiosity

,098

,120

Inner Religiosity

,137

,100

Awareness of Islamic Principles

,299

dummy Gender

Standardized
Coefficients
t

Sig.

2,695

,008

,100

,817

,416

2,177

,141

1,371

,174

1,548

,089

,296

3,349

,001

1,146

,152

,217

,075

,697

,487

1,707

dummy civil state

-,110

,222

-,046

-,495

,621

1,260

Riba Prohibition

-,269

,148

-,204

-1,821

,072

1,836

Education

-,031

,086

-,032

-,360

,719

1,136

Gross Income

,062

,053

,113

1,150

,253

1,417

Age

-,048

,013

-,350

-3,539

,001

1,437

Model
1 (Constant)

Beta

Collinearity
Statistics

Dependent Variable: Attitude towards Islamic Finance

R= ,346

74

VIF

More explicitly, when Muslims are older they tend to have a more negative attitude towards
Islamic Finance. Also the less strict one is towards the Riba prohibition the more negative the
Attitude towards Islamic Finance. The third and final significant result is that the higher the
Awareness of Islamic Principles the more positive the Attitude towards Islamic Finance.
Therefore, a better understanding of what Islamic Finance is will result in a more positive stance
towards Islamic Finance. The validity of the mentioned results is not affected by MultiCollinearity as the VIF diagnostics are considerably low, maxVIF 2.177.

7.4.2 Regression model 2 (Dependent variable= Islamic Products Interesting)

The results of the second regression model, which included all cases, indicated three variables as
significant predictors of the variable Islamic products interesting (see table 7). Specifically:
Actual religiosity, Awareness of Islamic Principles and Age. The standard error of the
estimate of the interest in Islamic Products in this regression model is SEE= 3.371.

Age was found to be a significant determinant as it was in the first model. Also the higher the
Actual religiosity, the higher the interest in Islamic Financing products. The third and final
significant result is that the higher the Awareness of Islamic Principles the more interested a
Muslim is in Islamic financing products. Therefore a better understanding of what Islamic
Finance is will result in more demand for Islamic products. The validity of the mentioned results
is not affected by Multi-Collinearity as the VIF diagnostics are low, maxVIF 2.183.

Table 7: Multiple Regression Analysis Results Model 2.

Unstandardized
Coefficients

Standardized
Coefficients

Std. Error

1 (Constant)
Actual Religiosity

7,423

2,621

Sig.

VIF

2,832
2,075

,006
,041

,988

,476

,272

Inner Religiosity

,155

,394

,043

2,183

,393

,695

Awareness of Islamic Principles

,636

,350

1,548

,173

1,816

,072

dummy Gender

,432

1,153

,858

,058

,504

,615

dummy civil state

1,713

,535

,878

,061

,609

,544

1,263

Riba Prohibition

-,573

,584

-,118

-,980

,330

1,837

Education

,155

,339

,043

,458

,648

1,138

Gross Income

,106

,211

,053

,502

,617

1,423

-1,758

,082

1,444

Model

Age

-,093

Beta

Collinearity
Statistics

,053

-,187

a. Dependent Variable: Islamic Products Interesting

R=,238

75

7.5 EVALUATION OF THE HYPOTHESES

All four regression models imply the existence of significant linear relationship between the
attitude towards Islamic finance (the three dependent variables and the construct) and certain
predictor variables as presented in the tables six to nine. The regression analyses finds high
coefficients of determination, showing that the variation in some specific variables and the
attitude of Muslims towards Islamic Finance is strong. This paragraph will discuss the regression
findings from the perspective of the research hypotheses.

H1a: The stronger the inner sense of Religiosity of Muslims the more positive the attitude
towards Islamic Finance.
The Inner Religiosity as measured by this survey was found not to be a significant predictor of
any of the four dependent variables. This could denote that the inner religiosity of a Muslim has
no influence whatsoever on their attitude towards Islamic Finance. This may have its origin in
the distribution of the construct Inner Religiosity in this study. The construct was created from
several variables, none of which were normally distributed but all were heavily skewed towards
a strong inner sense of religiosity.14 The resulting small variation in the dataset could render this
factor less important to explain the dependent variables. In other words it is possible that because
of the relatively high overall inner religiosity of the respondents it seems that this factor does not
have any influence on the attitude of the same respondents towards Islamic Finance.
Nonetheless, this hypothesis finds no support whatsoever in this study and thus its role as
predictor of the attitude of Muslims towards Islamic Finance is rejected from the proposed
conceptual framework.

H1b: The higher the Actual (practice) Religiosity of Muslims the more positive the attitude
towards Islamic Finance.
The Actual Religiosity of Muslims, as measured by this survey, is a significant predictor of the
dependent variable Islamic Products Interesting. As for its relationship with the other 3
dependent variables no relationship appeared significant. This indicates a possible positive
relationship between the actual religiosity (practice) and the amount of Islamic products one is
14

One sample K-S Test showed no normal distribution (all K>2,1, and all p<0,05)

76

interested in. Meaning that the more one abides by several Islamic practices (such as Prayer,
Fadjr prayer, Friday prayer and Mosque attendance) the more Islamic Finance products one is
interested in. This hypothesis does find support in this study if one takes Islamic Products
Interesting as the dependent variable, but in the other models there is no further evidence for
this hypothesis. These findings are partly in accordance with the findings of other researches
that Religiosity is an important determinant for the attitude towards Islamic Finance (Okumus,
2005; Zainuddin et al, 2004; Metawa and AlMossawi, 1998). However, these researches did not
make a distinction between the inner and the actual religiosity as was made in this research.

H2: The stronger the belief that Interest is Riba (and therefore Haram) the more positive the
attitude towards Islamic Finance.
The belief that Interest is Riba, as measured in this survey, is a significant predictor of the
construct; Attitude towards Islamic Finance. Contrasting, the relationship with all of the three
underlying variables is not significant. However, the first regression model indicates a negative
relationship between the attitude towards the Interest prohibition and Attitude towards Islamic
Finance. This indicates that the more one is of the opinion that Interest is Riba and should be
avoided or that it cant be avoided the more positive the attitude towards Islamic Finance. On the
other hand the Muslim whom is of the opinion that Interest is not Riba or has No idea has a
more negative attitude towards Islamic Finance, these findings are in accordance with Dar, 2004.
Conclusively, this hypothesis cannot be rejected but its role in the proposed framework on
Attitude towards Islamic Finance is not significant in all regression Models.

H3: The higher the awareness and knowledge of Islamic finance principles the more positive
the attitude towards Islamic Finance.
The Awareness of Islamic Principles, as measured by this survey, was found to be the most
important and significant predictor of the attitude towards Islamic Finance. In all four models
the Awareness on Islamic principles has a highly significant and positive relationship with the
dependent variable. This indicates that the more aware a Muslim is of the several Islamic
Principles regarding Finance the better the Attitude towards Islamic finance will be. The more
Islamic products one will be interested in, the more bothersome the lack of Islamic Finance will

77

be and the more positive ones attitude towards Islamic Finance will be. This hypothesis is
supported by all four regression models and therefore its role in the framework is accepted.

H4a: The higher the education level the more positive the attitude
towards Islamic Finance will be.
H4b: The higher the income level the more positive the attitude
towards Islamic Finance will be.
Both hypothesis are rejected from the framework because of the fact that none of the four models
supported either variable (education or income level) to be a significant predictor of the attitude
towards Islamic Finance. One possible explanation is for the variable education is the lack of
variance. In this study most respondents were highly educated (HBO or WO), but for the
variable Gross Income their was variance but nonetheless their was no significant relationship
with the attitude towards Islamic Finance. However, one should state that it is possible that
because of the high percentage of students the variance within the variable Gross Income was
due to the fact that lots of students have low incomes. Meaning that actually the gross income
variance was not due to lower socio-economic conditions but merely the age of the respondents.

H5a: The higher the age of a Muslim the more positive the attitude
towards Islamic Finance.
The Age of a Muslim does have a significant effect on all four dependent variables, as shown in
the four models. However the relationship found is not positive but the opposite: negative. The
older a Muslim is, the more negative the attitude towards Islamic Finance is. This means that the
above hypothesis is rejected by this research. The research even provides evidence for a
contrastive effect, namely that the higher the age is the more negative the attitude towards
Islamic Finance (for all four variables). However, one should note that the age mean of the
sample is 26,3 years with a standard deviation of 7.3. The majority (92%) of the respondents are
within the age group of 18 40 years. Meaning that the variance of the age in the data set was
not equally diverse as the real Muslim population and certainly not all ages were sufficiently
represented. Especially the age group above 40 was underrepresented. This is probably due to the

78

fact that it was a online-survey and the age group above 40 is not very active on the internet,
especially within migrant communities.

H5b: If a Muslim is married it is expected that his/her attitude towards

Islamic Finance is more positive.
None of the calculated models indicate a significant relationship between the variable civil state
and the attitude towards Islamic Finance. Therefore, a married Muslim will not be more or less
positive, per definition, towards Islamic Finance than an unmarried person. Within the dataset
most respondents were not married (77%), however a representative portion was (23%). This
shows that the necessary variation was present in the dataset. However, due to the fact that none
of the models indicate a significant relationship, that would confirm the conceptual framework,
this hypothesis is rejected.

79

8 CONCLUSION
This conclusive chapter firstly discusses the findings of the present study with regard to their
contribution to better understanding of the Attitude towards Islamic Finance. This discussion
gives ground for considering this studys possible implications for academics and businesses,
which are subsequently presented. Also several variables regarding the preference of the
respondents regarding an Islamic Financial Institution will be discussed and according with these
findings several recommendations will be made. Furthermore, the limitations of this study and
the suggestions for further research that would improve the current theory are discussed.

8.1 DISCUSSION
This study attempted to identify The Attitude towards Islamic Finance of the young Muslim
community in the Netherlands and the factors that determine this attitude. But to which degree is
the research question: What is the Attitude towards and the interest in Islamic Finance by
young Muslims and what factors determine them? answered by this empirical study?

The first part of the research question focuses on the attitude of Muslims towards Islamic
Finance in the Netherlands. The overall feeling of Muslims in the Netherlands towards Islamic
Finance is positive (18%) or very positive (57%). Only 6% of the respondents had a negative or
very negative attitude towards Islamic Finance. And 19% of the sample have a neutral attitude
towards Islamic Finance. It is also clear from the results of the survey that most Muslims (64%)
see the lack of Islamic Finance in The Netherlands as bothersome. Another 26% have a neutral
position regarding this matter and only 10% of the respondents feel that this lack of Islamic
Finance is not bothersome. These findings confirm the findings of the study regarding Islamic
Financing possibilities in the Netherlands by Bouissaghouane, M. en R. Oahalou in 2003. They
found that a large portion (77%) of the sample was positive about Islamic banking.

Another finding that measures the attitude of Muslims towards Islamic Finance is the fact that
more than 90% of the respondents were interested in at least one Islamic Product, if it becomes
available. The average respondents demand for these products is 5,71, the interest in some
Islamic products was particularly high namely: Housing Finance (80%), Islamic Pension plans
80

(63%), Islamic current accounts (69%) and savings account (68%). The conclusion of these
findings is that there is sufficient demand among Muslims to introduce Islamic Finance in the
Netherlands. In the next chapter recommendations will be made for how this Islamic Financial
Institution can be designed and organized and what Muslims feel as important conditions for
such an institution.

The second part of the research question focuses on the factors that determine this attitude
towards Islamic Finance. Several factors were found that significantly predict the attitude of
Muslims towards Islamic Finance. Age is one of these factors, the higher the age the more
negative the attitude of a Muslim towards Islamic Finance. This could imply that the more one
engages in regular finance, as one gets older, the less interested one becomes in Islamic Finance.
It can also be understood in the light of increased attention for Islamic Finance in recent years in
articles, lectures, university discussions, books, organizations and mosques. According to
sociological research young Muslims, compared to 10 years ago, demand more space for their
own views and are less willing to adapt in cultural and religious aspects. (Entzinger and
Dourleijn, 2008) Another possible explanation is that older Muslims are more often religious in a
more traditional (culturally influenced) way. (Demant, 2005) Their religious activities are the
same as they are in the nation of origin, where Islamic Finance was not available and therefore is
unknown. Contrasting, the younger generations seem to be less traditional and tend to separate
their religious identity from the cultural beliefs of their parents and older generations (Phalet,
2004). This returning to the pure and original Islam could explain the more positive attitude
and higher interest in Islamic Finance of younger Muslims.

Secondly this study identifies actual religiosity to have a significant positive relationship with the
interest in Islamic financing products. The higher the actual religiosity (which is measured by the
degree of observance of several Islamic regulations) of a Muslim the more Islamic Products one
is interested in. This relationship has not been found before, mainly due to the fact that similar
studies did not distinguish between the actual religiosity and the inner religiosity. Inner
religiosity was not found to have a significant relationship with the attitude towards Islamic
Finance or the interest in Islamic Products. A possible explanation for this is the high overall
inner sense of religiosity of Muslims (especially of Moroccan origin) in the Netherlands. Only
81

3% of Moroccans considers himself as non-religious (Phalet, 2004). This could indicate that
although the majority of Muslims see themselves as religious, it does not mean that they actually
abide by Islamic Shariah. Although inner religiosity and actual religiosity were found to be
significantly correlated. The variance in actual religiosity of Muslims is much larger than the
variance in inner religiosity in this study. This could possibly explain the difference between the
two.

Another factor that proved to significantly drive the attitude of Muslims towards Islamic Finance
was the attitude of the Muslim towards the interest prohibition. If a Muslim is more of the
opinion that interest is Riba and that it should be avoided he has a more positive attitude towards
Islamic Finance than when he is of the opinion that interest is not Riba. This is inline with the
research of Dar (2003), which states that if a Muslim is not convinced of the fact that interest is
Riba he will have no interest in Islamic Finance.

Finally, the awareness on Islamic Principles was found to be the most important driver of the
attitude towards Islamic Finance as well as the interest in Islamic Products. A highly significant
positive relationship with all dependents was found, meaning that the higher the awareness on
Islamic Finance, the higher the interest in Islamic financing products and the more positive the
attitude towards Islamic Finance will be. This relationship has been found before in similar
studies such as Metawa and AlMossawi, 1998; Dar, 2003. It should be stated however that large
portions of the sample (68%) have no awareness on Islamic principles whatsoever, similar to the
study of Gerards and Cunningham (1997) in Singapore (also with a large Muslim minority and
without the presence of an Islamic Financial Institution). One of the reasons for this could be the
lack of an Islamic Financial Institution or the lack of religious education in the Netherlands.
Nevertheless this study identifies the awareness on Islamic Financing principles as the most
important factor influencing the attitude towards Islamic Finance and the interest in Islamic
products. Enhancing the awareness should further enhance the interest and the positive attitude
towards Islamic Finance, as was also found by Haron, Ahmed and Planisek in 1994.

Nevertheless, several factors did not prove to affect the attitude of Muslims towards Islamic
Finance or the interest in Islamic Financing products. Marital status, the education level, the
82

gross income level, the inner religiosity and gender did not have any significant role in
explaining the dependents. For the education level and income level these results contradict what
Dar (2003) found in the UK. A possible explanation for this has already been given, the variation
of the sample with regard to the education level was to small to have a significant influence.

To conclude, although the important predictors, as identified by this study, explained a portion of
the variation in the attitude of Muslims towards Islamic Finance and the interest in Islamic
Financing products, they left unexplained a large part of its variation. This means that other
factors that play a role in explaining the attitude towards and the interest in Islamic Finance were
not included in the suggested framework. Such factors could be the area one lives in, which
Islamic school one belongs to, which mosque one attends, the books one reads, or the job one
has. This empirical research however, identified several drivers that explain part of the variance
in the attitude towards and the interest in Islamic Finance. Therefore the study has significant
academic, governmental and business implications, which are discussed subsequently.

8.2 ACADEMIC IMPLICATIONS

The financing and marketing literature is thinly sown with studies that try to examine the attitude
towards, the interest in Islamic Finance and the factors that determine this attitude and interest.
And most of these studies focus on a non-western nation making it hard to compare with the
Dutch situation. The only exception is the study performed by Dar in the UK (2003), also other
studies (AlMossawi, 2001; Naser and AlKatib, 1998) focussed on existing customers of Islamic
Finance. Meaning that Islamic Finance was already available unlike the current situation in the
Netherlands, this made these researches substantially different because of the fact that the
customers of these Islamic Banks were asked for their attitude towards a specific bank not for
their attitude towards Islamic Finance as a whole.

This study confirms all the findings of the study performed by Bouissaghouane and Oahalou
(2003). The extremely positive attitude towards Islamic Finance of Dutch Muslims seems
unchanged. The potential of the market is also confirmed because of the fact that large portions
of the sample had interest in at least one Islamic product.

83

Additionally this study is the first to identify factors that influence the attitude of Dutch Muslims
towards Islamic Finance. The findings contribute in the formation of a framework that describes
the determinants for Muslims regarding their attitude towards Islamic Finance and their interest
in Islamic financing products. But especially for Muslim minorities living in a western country,
without an Islamic Financing Institution.

8.3 GOVERNMENT AND BUSINESS IMPLICATIONS

Besides the academic contribution, the findings of this study are also valuable to the ministry of
finance and the financial world. For the government, currently investigating the possibilities of
Islamic Finance in the Netherlands, the confirmation that Muslims in the Netherlands have high
interest in and a very positive attitude towards Islamic Finance is particularly valuable.

For the financial world the study illustrates what factors influence the attitude of Muslims
towards and the interest in Islamic Finance. Especially interested parties in this niche market
(conventional banks, Islamic financial institutions or entrepreneurs) can use the findings of this
study to increase the interest in Islamic Finance in the Netherlands but also in other places. Using
marketing techniques to increase the knowledge/ awareness on Islamic Finance can have a very
positive influence on the interest for Islamic Finance. Also Islamic Organizations (mosques etc)
can use educational means to inform Muslims about Islamic Financing principles and increase
the lobby for Islamic Finance.

Furthermore some variables have not been discussed yet and they have important implications
for institutions that are considering introducing Islamic Finance in the Netherlands. The reaction
of respondents to factors that could influence the decision whether or not to utilize Islamic
Finance, if it becomes available, is presented in table 10.

84

Table 10
Very

unimportant

neutral

important

unimportant

Very
important

Image

0%

2,7%

17,1%

37,8%

42,3%

Service

0,9%

0%

4,5%

19,6%

75,0%

Partners/relatives/friends

4,5%

18,8%

35,7%

25%

16,1%

Composition of Shariah board

2,7%

1,8%

18,0%

24,3%

53,2%

Comparable cost

0.9%

2,7%

26,4%

39,1%

30,9%

Comparable yield

3,6%

5,5%

28,2%

34,5%

28,2%

These results suggest that three factors are an important influence in the possible switch to an
Islamic Financing institution for Muslims. The quality of service provided by such an institution
is very important according to 75% of the sample and almost 20% regarded it as important. The
importance of this factor is in line with the existing literature on patronage factors for regular
financing institutions. (Taylor and Baker, 1994; Levesque and McDougall 1996; Jamal and
Nasser, 2002)

The image was also found to be an important consideration with 42% regarding it as very
important and another 37% regarding it as important. The image as important selection criterion
for a financial institution is also found in similar studies, such as Kennington (1996) and
AlMossawi (2001).
The comparable cost (31%) and yield (28%) of such an Islamic Financial institution (in relation
with regular financing institutions) are also found to be considerably important in this study.
Only small portions of the sample see these factors as unimportant, this indicates that most
Muslims are not willing to pay a large premium for Shariah compliant products over regular
products. This is very important for possible suppliers of Islamic Finance, they should keep costs
low (credit products) and yields high (savings products) in accordance with the conclusions of
Dar (2004).

A result which contradicts the study of Metawa and AlMossawi (1998) is the fact that large
portions (57%) of the sample did not see the recommendation of family and friends as an
important influence of their decision whether or not to patronize an Islamic Financial Institution.
85

whatsoever, as long as the products were

Islamic. Another group of respondents
(17%) had no idea. This could mean that
they

have

no

knowledge

about

the

consequences of different structures but the

more logical explanation is that they did not
regard this question as important. Twenty
percent of the sample had a preference for a
Dutch financial institution offering Islamic
products working with so called Islamic
The

importance

of

Shariah

board

windows. The second (19%) preference of

composition was also found to be an

the sample is for an Islamic Financing

important consideration for Muslims whether

institution from an Islamic country. And

or not to switch to an Islamic institution.

only 11% had a preference for a western

More than 50% found it very important and

almost

25%

found

it

important.

Islamic Financing institution. It should be

The

noted that the lack of preference for one

respondents were also asked how this Sharia

specific type of organization could pave the

board should be composed. More than 50%

way for whoever enters this market first.

felt that such a board should be formed from

both international Muslim scholars and
national Muslim scholars, surprising was the
fact that only a mere 5% felt that such a
Shariah board should be formed out of
Dutch scholars only.

The respondents were also asked about the

ideal structure of an Islamic Finance
institution when it enters the Dutch market.
Important to note is that 32% of the
respondents did not have any preference

86

8.4 LIMITATIONS AND FUTURE RESEARCH DIRECTIONS

This study has, like every study, its limitations. The first and foremost is the representativeness
of the sample, which was largely restricted to young people. It was chosen to focus on the
attitude of young Muslims in the Netherlands, but with this choice older Muslims were (not
explicitly) excluded. However, because data was gathered threw the Internet, implicitly it meant
exclusion for older Muslims, due to the fact that these are not as familiar with Internet as young
people.

The way the survey was distributed is also a limitation due to the fact that the researchers
network played an important role in the distribution. This was mentioned before as a possible
reason for the relatively high average education level and the fact that large portions of the
sample were of Moroccan origin.

Another important limitation is the invitation for the survey itself, respondents were asked to
participate in a survey on Islamic Finance, this can cause response bias. Meaning that people
with strong opinions and interest in Islamic Finance are more inclined to react to a survey
regarding Islamic Finance than Muslims whom are not particularly interested.

It is also important to note that the choice was made to invite Muslims to participate in the
survey and ask them about their attitude towards Islamic Finance. Non-Muslims were not
invited, while it is not certain that they are not interested in Islamic Finance. It could very well be
that a non-Muslim is interested due to his objection to regular finance or due to a cost benefit.

The final boundary is related to the methodology that was followed in order to infer some basic
conclusions out of different variables and the factors that have been isolated. It is a fact that
regression models give a hint towards causality but significance is not enough to prove causality.

Future researches can be stated on the basis of the limitations. The first suggestion is increasing
the representativeness of the sample and increasing the number of respondents. A broader sample
of nationalities, age, education levels and income levels can give a better view of the attitude of

87

the entire Muslim community in the Netherlands. It can even be considered to let Non-Muslims
participate in the research.

Because of the fact that this study clearly finds that the attitude of the majority of Muslims in the
Netherlands towards Islamic Finance are positive. It is clear that there is a market for such
financing instruments but the Dutch tax and real estate laws are restrictive factors. It should be
investigated thoroughly which laws are preventing Islamic Finance and how these laws can be
circumvented, or propositions can be made for new laws which do not restrict Islamic Finance.

It is also imperative to inform the academic world, non-Muslims and Muslims about Islamic
Finance. Not only because of its opportunitys due to the financial crisis and current reforms that
are taking place and/or are being discussed. Like increased attention in the Netherlands (and the
world) for social entrepreneurship and Corporate Social Responsibility which Islamic
Financing can contribute too. But also inform civil society because of the social/political climate
in the West, especially in the Netherlands, where Islam and especially words like Sharia have a
negative image. The image of Islam needs to improve if a political majority to introduce Islamic
Finance is to be attained.

Finally, what needs to be highlighted is that this empirical study successfully identified several
factors that determine the attitude and interest in Islamic Finance. The findings contribute in the
formation of a framework that describes the determinants for Muslims regarding their attitude
towards Islamic Finance and their interest in Islamic financing products. It also establishes that
interest in Islamic Finance among young Dutch Muslims is high and it provides useful additional
information for Government agencies and Businesses.

88

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Appendix A: European council for fatwa and research on

mortgages in the West
The Council discussed in detail several papers concerning the purchasing of houses through
mortgage and came to the following conclusion:
1. It stresses, according to what has been agreed upon by the Muslim Ummah, that usury is
forbidden. It is a major sin and is one of the seven gravest ones. Those who commit it are
considered as being waging war against Allah, and His Prophet (peace and blessings be upon
him). In this vein, the Council supports what has been decided by Fiqh Councils throughout the
Muslim world that bank interests are usury.
2. Therefore, the Council invites the Muslim community to do its utmost to seek Islamic
alternatives such as Murabaha (sale at a profit), which is practiced by Islamic banks. They should
avoid doubtful matters to the furthest extent possible. It encourages them to establish their own
construction companies that can build houses and sell them to Muslims with relaxed, less strict
lawful ways of payments.
3. The Council calls upon Islamic organizations throughout Europe to enter into negotiations
with European banks to find formulas that are acceptable to the Muslim client. Formulas like
Bei` At-Taqsit or sale for deferred payment, where the buyer is required to pay more money due
to the fact that payment is not immediate. This formula will help both banks as well as the
Muslim community. This formula is in operation in some European banks.
In addition to this, some European banks opened branches in some Muslim countries, where
transactions are run according to Shariah as in Bahrain. In this regard, the Council would send
appeals to European banks to observe the needs of the Muslim community.
4. If all the above suggestions are unavailable, the Council, in the light of evidence and juristic
considerations, see no harm in buying mortgaged houses if the following restrictions are strictly
observed:
A. The house to be purchased must be for the buyer and his household.
B. The buyer must not have another house.
C. The buyer must not have any surplus of assets that can help him buy a house by means other
than mortgage.
This fatwa is based on the following two major juristic considerations:
The agreed upon juristic rule which states that extreme necessities turn unlawful matters lawful.
This rule is derived from five Quranic texts, amongst them:
(But whosoever is forced by necessity without willful disobedience, nor transgressing due limits;
92

(for him) certainly, your Lord is oft-Forgiving, Most Merciful.) (An-Nahl 16: 115)
Moreover, jurists have established that hajah or the necessity or need, whether for an individual
or a group, can be treated in equal terms with darurah or extreme necessity. Hajah or need is
defined as those things which put the Muslim in a difficulty, if not fulfilled, even if he/she can do
without. Darurah or extreme necessity, on the other hand, is that which the Muslim cannot
manage without. Allah has lifted difficulty as stated in Surat Al-Hajj and Al-Maidah:
(And He has not laid upon you in religion any hardship (Al-Hajj: 78), and (Allah does not want
to place you in difficulty, but He wants to purify you, and to complete His Favour to you that you
may be thankful.) (Al-Ma`idah 5: 6)
Any house that meets the criteria set up by the definitions of hajah and darurah, as mentioned
above, is the one suitable for the Muslim family in terms of size, location, locality and amenities.
However, the fatwa is built on the rule of darurah or hajah, which is treated in a similar manner
like darurah, the Council stresses that there is another rule which governs and complements the
rule of extreme necessity and need. This rule states that what has been made permissible due to
extreme necessity must be dealt with great care and taken in measure. It should be restricted to
the category of people who are in real need for a house. However, the fatwa does not cover
taking up mortgage to buy a house for commercial reasons or for purposes other than buying a
personal house for those who do not have one.
Undoubtedly, accommodation is necessary for individuals as well as families, and its part of the
great blessings which Allah has His servants with, as He says: (And Allah has made for you in
your home an abode.) (An-Nahl 16: 80). The Prophet (peace and blessings be upon him) has
explained that a spacious house is one element of three or four elements that constitute the
concept of happiness.
Rental houses do not fulfil all the Muslim needs. They do not give him the sense of security, as
he/she keeps paying towards rents for long periods of time. He/she might be asked to evacuate
their rented accommodation for some reasons like size of the family, or growing number of
guests. When getting older or have his/her benefit suspended he/she might even be subject to
eviction. Buying ones own house spares Muslims all these discomforts and helps them to be in
the immediate vicinity of Mosques, Islamic centres or schools as it helps them build up their
smaller Muslim community within host countries where families get to know each other and
work to establish their cultural identity.
Purchasing a house also helps the Muslim family to modify it to accommodate their social and
religious needs. Besides all these individual benefits, it helps the Muslim community, being a
minority, to free themselves from the financial pressure that renting accommodation often
causes, and focus their attention on dawah. This cannot in fact be possible if the Muslim family
works all the time just to cover the expenses of their rented accommodations as well as their
living.

93

The second criterion upon which the fatwa is based is the juristic verdict which claims that it is
permissible for Muslims to trade with usury and other invalid contracts in countries other than
Islamic countries. This opinion is held by a number of renowned jurists such Abu Hanifah, his
colleague Muhammad As-Shaybani, Sufyan At-Thawri, Ibrahim An-Nakha`ie, and according to
one opinion of Ahmad Ibn Hanbal which was declared as true by Ibn Taymiah, according to
some Hanbali sources. It is also the declared opinion of the Hanafi school of jurisprudence. What
makes this last criterion accommodates our fatwa is a number of considerations, amongst which
are the following:
1. According to the Shari`ah, Muslims are not obliged to establish the civil, financial and
political status of the Shari`ah in non-Muslim countries, as these lie beyond their capabilities.
Allah does not require people to do things that are beyond their capacity.
2. Prohibiting usury is a matter that concerns the host non-Muslim countries, and which Muslim
communities can do nothing about it. It has many things to do with the socio-economic
philosophies of the host countries. However, in these countries, what is required of the Muslim is
to abide by Shariah rulings in matters that concerns him in person such as the rules that govern
acts of worship, food, drinks and clothes, marriage, divorce, inheritance and so on.
If Muslims choose not to deal with contracts involving usury in non-Muslim countries, this
might weaken them financially. Islam is, however, supposed to strengthen Muslims not to
weaken them, increase rather than diminish them, benefit and not to harm them.
Some Salafi scholars claimed that Muslims could inherit non-Muslims as this goes in line with
the Hadith which says: , i.e. increases Muslims in power, wealth, etc. Similar in content is the
other Hadith which says: Islam is superior and none can excel it.
Therefore, if Muslims are not to trade with these invalid contracts and transactions (where
extreme necessity and urgent need is involved), then they will end up paying what is required
from them (in transactions that involve usury) without receiving any benefit in return. They will
thus be losers as they will be obliged to honour these transactions, and in return get nothing. No
doubt, this will bring financial detriments to Muslims.
Concerning cases where the Muslim is the recipient, i.e. the beneficiary, the Hanafis allow usury
in and they permit invalid contracts only if two conditions are satisfied:
First: Where the Muslim is the beneficiary.
Second: Where deception, involving non-Muslims, is avoided.
Arguing against this claim, first we would maintain that in our case, the benefit has not been
realized. The second is, the claim has not been authenticated as this has been affirmed by
Muhammad As-shaibani one of the chief scholars of the Hanafi Juristic School and a student of
Abu-Hanifah- in his book: As-Siar Al-Kabir. Moreover, earlier scholars of the school did not set
up any conditions (regarding trading with usurious contracts in non-Muslim lands). However, in
94

our case even if the Muslim is the giver (of usury) he/she is still the beneficiary as he/she will
win an own house after a number of years.
Furthermore, statements forwarded by Muslims living in Europe to the Council through
correspondence and/or direct contacts show that payments made through mortgage are equal, and
sometimes lower, than those paid as mere rent mortgage. It follows that if we are to forbid
usurious transactions, Muslims will be impeded from securing their own house, despite it being
one of Al-Hajat Al-Asliyyah i.e. the essential needs, according to the jurists terminology. Hence,
Muslims will end up paying towards rents for a number of years without owning their houses,
while they can own them if these payments are to be made towards mortgages.
Finally, even if this transaction is declared invalid by the Hanifi and those who hold a similar
view, it will certainly be permitted where hajah (i.e. the need that is treated by jurists on similar
grounds like darurah, which makes impermissible things permissible) comes into consideration.
What makes our argument sound and valid is that Muslims are compelled to take usury, i.e. they
do not deal with it on purpose or by their free choice. The prime criterion for forbidding usury,
according to a number of Quranic verses, revolves essentially around taking usury (not giving
it). However, giving usury is forbidden only to obstruct pretext, i.e. ways lead to usury, i.e., Sad
Atharai. On similar grounds, notaries and witnessing usurious transactions are prohibited.
While taking usurious loan is categorically forbidden, paying interest attached to a loan is
permitted if there is hajah i.e., an urgent need as maintained by a number of jurists. It has also
been maintained that taking a usurious loan is permitted if there is no other way available.
A famous rule that we could put forward in this regard is what has been made forbidden for an
essential reason within the transaction can only be made permissible for cases where darurah i.e.
extreme necessity is involved, and what has been made forbidden to obstruct further ways that
lead to usury can be made permissible for hajah, i.e. need.

Appendix B: Conditions for Murabaha transactions. (Usmani, 2000)

Basic Features of Murabaha Financing:
1. Murabaha is not a loan given on interest. It is the sale of a commodity for a deferred price
which includes an agreed profit added to the cost.
2. Being a sale, and not a loan, the Murabaha should fulfill all the conditions necessary for a
valid sale, especially those enumerated earlier in this chapter.
3. Murabaha cannot be used as a mode of financing except where the client needs funds to
actually purchase some commodities. For example, if he wants funds to purchase cotton as a raw
material for his ginning factory, the Bank can sell him the cotton on the basis of Murabaha. But
where the funds are required for some other purposes, like paying the price of commodities
already purchased by him, or the bills of electricity or other utilities or for paying the salaries of

95

his staff, Murabaha cannot be effected, because Murabaha requires a real sale of some
commodities, and not merely advancing a loan.
4. The financier must have owned the commodity before he sells it to his client.
5. The commodity must come into the possession of the financier, whether physical or
constructive, in the sense that the commodity must be in his risk, though for a short period.
6. The best way for Murabaha, according to Shariah, is that the financier himself purchases the
commodity and keeps it in his own possession, or purchases the commodity through a third
person appointed by him as agent before he sells it to the customer. However, in exceptional
cases, where direct purchase from the supplier is not practicable for some reason, it is also
allowed that he makes the customer himself his agent to buy the commodity on his behalf. In this
case the client first purchases the commodity on behalf of his financier and takes its possession
as such. Thereafter, he purchases the commodity from the financier for a deferred price. His
possession over the commodity in the first instance is in the capacity of an agent of his financier.
In this capacity he is only a trustee, while the ownership vests in the financier and the risk of the
commodity is also borne by him as a logical consequence of the ownership. But when the client
purchases the commodity from his financier, the ownership, as well as the risk, is transferred to
the client.
7. As mentioned earlier, the sale cannot take place unless the commodity comes into the
possession of the seller, but the seller can promise to sell even when the commodity is not in his
possession. The same rule is applicable to Murabaha.
8. In the light of the aforementioned principles, a financial institution can use the Murabaha as a
mode of finance by adopting the following procedure: (i) The client and the institution sign an
overall agreement whereby the institution promises to sell and the client promises to buy the
commodities from time to time on an agreed ratio of profit added to the cost. This agreement
may specify the limit upto which the facility may be availed. (ii) When a specific commodity is
required by the customer, the institution appoints the client as his agent for purchasing the
commodity on its behalf, and an agreement of agency is signed by both the parties. (iii) The
client purchases the commodity on behalf of the institution and takes its possession as an agent
of the institution. (iv) The client informs the institution that he has purchased the commodity on
his behalf, and at the same time, makes an offer to purchase it from the institution. (v) The
institution accepts the offer and the sale is concluded whereby the ownership as well as the risk
of the commodity is transferred to the client. All these five stages are necessary to effect a valid
Murabaha. If the institution purchases the commodity directly from the supplier (which is
preferable) it does not need any agency agreement. In this case, the second phase will be dropped
and at the third stage the institution itself will purchase the commodity from the supplier, and the
fourth phase will be restricted to making an offer by the client.
The most essential element of the transaction is that the commodity must remain in the risk
of the institution during the period between the third and fifth stage.

96

This is the only feature of Murabaha which can distinguish it from an interest-based transaction.
Therefore, it must be observed with due diligence at all costs, otherwise the Murabaha
transaction becomes invalid according to Shariah.
9. It is also a necessary condition for the validity of Murabaha that the commodity is purchased
from a third party. The purchase of the commodity from the client himself on buy back
agreement is not allowed in Shariah. Thus Murabaha based on buy back agreement is nothing
more than an interest based transaction.
10.The above mentioned procedure of the Murabaha financing is a complex transaction where
the parties involved have different capacities at different stages. (i) At the first stage, the
institution and the client promise to sell and purchase a commodity in future. This is not an
actual sale. It is just a promise to effect a sale in the future on Murabaha basis. Thus at this stage
the relation between the institution and the client is that of a promisor and a promisee. (ii) At the
second stage, the relation between the parties is that of a principle and an agent. (iii) At the third
stage, the relation between the institution and the supplier is that of a buyer and seller. (iv) At the
fourth and fifth stage, the relation between the institution and supplier is that of buyer and seller
comes into operation between the institution and the client, and since the sale is effected on
deferred payment basis, the relation of a debtor and creditor also emerges between them
simultaneously. All these capacities must be kept in mind and must come into operation with all
their consequential effects, each at its relevant stage, and these different capacities should never
be mixed up or confused with each other.
11. The institution may ask the client to furnish a security to its satisfaction for the prompt
payment of the deferred price. He may also ask him to sign a promissory note or bill of
exchange, but it must be after the actual sale takes place, i.e. at the fifth stage mentioned above.
The reason is that the promissory note is signed by a debtor in favor of his creditor, but the
relation of debtor and creditor between the institution and the client begins only at the fifth stage,
whereupon the actual sale takes place between them.
12. In the case of default by the buyer in the payment of price at the due date, the price cannot be
increased. However, if he has undertaken, in agreement to pay an amount for a charitable
purpose, as mentioned in paragraph 7 of the rules of Bai Mujjal, he shall be liable to pay the
amount undertaken by him. But the amount so recovered from the buyer shall not form part of
the income of the seller / the financier. He is bound to spend it for a charitable purpose on behalf
of the buyer, as will be explained later in detail.

97

Appendix C: Regression model 3 (Dependent variable= Positivity

towards Islamic Finance)
The results of the third regression model, which included all cases, indicated two variables as
significant predictors of the variable Positivity towards Islamic Finance (see table 8).
Specifically: Awareness of Islamic Principles and Age. The standard error of the estimate of
the positivity towards Islamic Finance in this regression model is SEE= 0,909.

More explicitly, when Muslims are younger they tend to be more positive about Islamic Finance.
Also the higher the awareness of Islamic Principles the more positive a Muslims attitude towards
Islamic finance is. Therefore a better understanding of what Islamic Finance is will result in
more positivity among Muslims towards Islamic Finance. The validity of the mentioned results is
not affected by Multi-Collinearity as the VIF diagnostics are considerably low, maxVIF 2.170.

Table 8: Multiple Regression Analysis Results Model 3.

Unstandardized
Coefficients
Model
1 (Constant)

Std. Error

Standardized
Coefficients
Beta

Collinearity
Statistics
t

Sig.

VIF

2,858

,703

4,067

,000

Actual Religiosity

-,019

,127

-,020

-,150

,881

2,170

Inner Religiosity

,105

,105

,110

1,003

,318

1,514

Awareness of Islamic Principles

,269

,094

,274

2,877

,005

1,153

dummy Gender

,104

,228

,053

,457

,649

1,729

dummy civil state

-,124

,235

-,052

-,525

,600

1,263

Riba Prohibition

-,213

,155

-,166

-1,378

,171

1,843

Education

-,037

,090

-,039

-,414

,680

1,125

Gross Income

,005

,056

,010

,094

,925

1,428

Age

-,035

,014

-,266

-2,480

,015

1,462

a. Dependent Variable: Positivity towards Islamic Finance

R=,204

98

Appendix D: Regression model 4 (Dependent variable= Lack of

Islamic Finance bothersome)
The results of the fourth regression model, which included all cases, indicated the same two
variables as significant predictors of the variable Lack of Islamic Finance is Bothersome (see
table 9). Specifically: Awareness of Islamic Principles and Age. The standard error of the
estimate of the positivity towards Islamic Finance in this regression model is SEE= 1,101.

More explicitly, when Muslims are younger they tend to find the lack of Islamic Finance in the
Netherlands more bothersome. Also the higher the awareness of Islamic Principles the more
bothersome the lack of Islamic Finance will be for a Muslim. The validity of the mentioned
results is not affected by Multi-Collinearity as the VIF diagnostics are considerably low, maxVIF
2.164.

Table 9: Multiple Regression Analysis Results Model 4.

Unstandardized
Coefficients
B

Std. Error

3,580

,852

Actual Religiosity

,023

,154

Inner Religiosity

,163

,127

Awareness of Islamic Principles

,287

dummy Gender

Standardized
Coefficients
t

Sig.

4,201

,000

,019

,146

,884

2,164

,140

1,283

,202

1,514

,114

,238

2,509

,014

1,147

,048

,277

,020

,173

,863

1,722

dummy civil state

-,391

,285

-,136

-1,369

,174

1,260

Riba Prohibition

-,188

,188

-,121

-1,003

,318

1,842

Education

-,120

,109

-,103

-1,100

,274

1,123

Gross Income

,088

,068

,136

1,289

,200

1,422

Age

-,056

,017

-,345

-3,227

,002

1,455

Model
1 (Constant)

Beta

Collinearity
Statistics

a. Dependent Variable: Lack of Islamic Finance Bothersome

R=,213

99

VIF

Appendix E: Survey Questionnaire

Salaam Aleikoem wa rahmattullahi wa barakatoehoe. Welkom bij deze enquete naar 'de
vraag naar Islamitische financiele produkten' (en de factoren hierachter). Het zal niet veel
van uw tijd kosten. Alvast vriendelijk bedankt voor het invullen.

1.

Wat houdt het Riba verbod uit de Qur'an en Soenna voor u in met betrekking tot
rente?

Rente is Riba en dus haram, en ik doe er alles aan om te vermijden dat ik

ermee in contact kom.
Rente is Riba en dus haram, maar door omstandigheden kan ik er helaas
niet omheen.
Rente is geen Riba, ik heb dus geen problemen met rente.
Geen idee.

2.

Wat is uw geslacht?

Man
Vrouw

3.

Wat is uw leeftijd?

100

4. Land van herkomst

Nederland

Voormalig
anders
Turkije Marokko Suriname Afghanistan Iran Joegoslavie Indonesie namelijk:

Geboorteland

Geboorteland
moeder

Geboorteland
vader

5.

Burgelijke Staat

gehuwd
ongehuwd

6.
Hoogst genoten opleidingsniveau.
(ook indien niet afgerond)

Geen

Basisschool (of vergelijkbaar)

vmbo/mavo (of vergelijkbaar)

havo/vwo (of vergelijkbaar)

MBO (of vergelijkbaar)

HBO (of vergelijkbaar)

WO/universitair (of vergelijkbaar)

101

7.

8.

Wat is uw bruto jaarinkomen?

<10.000

10.000-15.000

15.000-20.000

20.000-30.000

30.000-40.000

>40.000

Religiositeit
zeer mee oneens

Ik ben religieus
Ik ben NIET veel bezig met mijn
geloof
Moslim zijn betekent veel voor
mij
Ik ben er trots op dat ik moslim
ben
Ik voel me NIET sterk
verbonden met de Islam
Ik identificeer mij met andere
moslims
Ik zie mezelf als moslim
Het gebed is zeer belangrijk in
het geloof.

102

zeer mee eens

9.

Hoe vaak bidt u?

nooit
minder dan 5 keer per dag
meestal 5 keer per dag
altijd 5 keer per dag
meer dan 5 keer per dag

10.

Bidt u fadjr (het ochtendgebed) op tijd?

nooit
zelden
soms
meestal
altijd

11.

Vast u de Ramadan?

nee
ja

103

12.

Hoe vaak bezoekt u de moskee?

nooit
zelden (1-2 keer per jaar)
soms (1-2 keer per maand)
regelmatig (1-2 keer per week)
vaak (vaker dan 2 keer per week)

13.

Hoe vaak participeert u aan het gezamenlijke vrijdaggebed?

nooit
zelden (minder dan 1 keer per maand)
regelmatig (1-2 keer per maand)
zo vaak mogelijk
altijd (iedere week)

104

14.

Houding tegenover Islamitisch financieren

helemaal mee oneens

helemaal mee eens

Ik sta positief tegenover

Islamitisch financieren.
Ik vind het vervelend dat in
Nederland Islamitisch
financieren niet mogelijk is.
Mijn kennis van Islamitisch
financieren is goed

15.

Welke islamitische financiele principes zijn bij u bekend? (meerdere opties

mogelijk)

Ijara (lease)

Musharaka (Winst en verlies

deling)
Murabaha (kost+opslag verkoop)

Mudaraba (gelimiteerde
partnerschap)
Salam en Istisna (islamitische
forwards)
Takaful (verzekeringen)

Islamitische aandelen en
investeringsfondsen
Onbekend met de principes

105

16.

Welke bestaande financile producten gebruikt u nu? (meerdere opties mogelijk)

betaalrekening

spaarrekening

pensioen

hypotheek

consumptieve lening (autokrediet,

postorderkrediet, creditcardkrediet etc)
schade of zorgverzekeringen

beleggingen (aandelen,
opties, obligaties, etc.)
Rood staan of doorlopend
krediet

levensverzekering

17.

Welke bestaande extra financile producten wilt u in de toekomst gebruiken?

(meerdere opties mogelijk)

betaalrekening

spaarrekening

pensioen

hypotheek

consumptieve lening (autokrediet,

postorderkrediet, creditcardkrediet
etc)
schade of zorgverzekeringen

beleggingen (aandelen, opties,

obligaties, etc.)

levensverzekering

106

Rood staan of doorlopend

krediet
geen (dus u wilt in de
toekomst geen extra produkten
gebruiken)

18.

Naar wat voor soort Islamitische financile instelling gaat uw voorkeur uit?

Nederlandse bank met islamitische producten (bv Rabobank of Fortis)

Islamitische bank uit 'het westen' ( bv. Islamic Bank of Britain)
Islamitische bank uit islamitische wereld (bv. Dubai Islamic Bank)
Geen voorkeur/ Maakt mij niet uit
Geen idee/ Ik weet niet

19.

Welke islamitische financile producten wilt u in de toekomst gebruiken als ze

beschikbaar worden? (meerdere opties mogelijk)

betaalrekening

spaarrekening

pensioen

woningfinanciering (soort
hypotheek)
beleggingen (aandelen,
opties, obligaties, etc.)

consumptieve lening (autokrediet,

postorderkrediet, creditcardkrediet
etc)
schade of zorgverzekeringen
levensverzekering
Geen: Niet geinteresseerd in
Islamitische producten

Rood staan of doorlopend

krediet
bedrijfsfinanciering
Alle islamitische produkten

107

20.

Als er een Islamitische financile instelling de Nederlandse markt betreedt, hoe

belangrijk zouden de volgende factoren zijn in uw keuze voor het gebruik van deze
instelling?
zeer onbelangrijk

Het imago
De service
De mening van uw partner,
familie en vrienden/kennissen
De opbrengsten moeten
vergelijkbaar zijn met de
opbrengsten van 'normale'
produkten. (bij
investeringsproducten)
De kosten moeten vergelijkbaar
zijn met 'normale' produkten.
(bij kredietvormen bv
hypotheek, lening)
De samenstelling van de 'sharia
board' (de Sharia board
controleert de produkten op
islamitische correctheid)

108

zeer belangrijk

21.

Hoe zou de samenstelling van de Sharia board moeten zijn?

Internationaal erkende Moslimgeleerden

Moslimgeleerden uit Nederland
Mix van bovenstaande groepen
geen voorkeur/ maakt mij niet uit
geen idee/ ik weet niet

109