13 Jun 2024

Avoiding Riba in the 21st Century

Avoiding Riba in the 21st Century


Zahra is an Indian Iranian creative who loves learning. Her particular areas of interest are culture & identity. Outside of researching, writing and collating stories together, she’s an avid reader and traveller.

Avoiding Riba in the 21st Century

Finding it hard to avoid riba when it comes to taking control of your finances? Do you want to invest in a property but don’t want to be trapped by a mortgage?

When we take out a mortgage, we’re borrowing money, which is repaid back over a certain period of time.

The main reason lenders lend in the first place is that we must pay interest on the money we borrow. This interest has the potential to grow to be a sizable sum of money.

Our financial structures now rely on this form of interest, also known as riba, to buy a house or simply own a bank account. As a lot of us know, riba is not permitted in Islam.

What is riba?

Riba translates into English as either interest or usury. It refers to the concept of lending a particular amount of money and expecting a larger amount in return.

Islam stands alone in its comprehensive instruction on a wide range of topics, including how financial relationships should be handled.

The Quran takes a very clear stance on this practice.

‘O believers, devour not usury (riba), doubled and redoubled, and fear you God; haply so you will prosper.’


Why is riba forbidden?

The prohibition against riba is based on two grounds. The first is having interest results in effortless money-making. God wants everyone to put in a lot of effort and reap the rewards.

In addition, riba is essentially the opposite of the charity and compassion that the Quran promotes, as it’s a system that takes advantage of people.

With modern-day finances being built on interest, it can be difficult to maintain this Islamic duty upon us. However, there are emerging fintech businesses that are bringing an alternative way.

Primary Finance is a fintech company designed to help people manage money ethically and buy homes in a halal way, free of riba. We spoke to Raza Ullah, the CEO and founder, to tell us more.

Why did you set up Primary finance?

I’m an actuary by background. I’ve worked in the London financial markets all my life, I’ve worked for very large corporate companies.

One time I found myself effectively bragging to a guy sitting next to me. I was working at the Bank of England at the time. He was a young, non-Muslim guy, 20, something years old named Elliot.

I was saying to him, I’ve earned a lot of money & my plan is to retire early. By the time I’m 40 I want a big portfolio of properties and will live off the rental income. This was my state of mind at the time.

Elliot wagged a finger at me. He said, “What you’re talking about is going to deepen the housing crisis we have in the UK. With the skill set and experience you have, you have a responsibility to do something about it.

He used the word responsibility, which really struck me. What he was doing was giving me a lesson in Islamic etiquette, something I should have been aware of already. He was effectively saying Allah has given you a skill set, so do something useful with it.

That really hit me, like a tonne of bricks. It planted the seed in my mind, and it was later that same year I ended up going on Hajj. This is where I had a life-changing experience.

When I came home from Hajj, I ended my role at the Bank of England and I started setting up Primary Finance.

I decided that I wanted to set up a way, not just Muslims, but anyone ethically minded who disagrees with the enormous oppression of labour and debt.

To create a way for people to be able to buy a home without the shackles of debt and the oppressive nature of labour. I wanted a partnership-based agreement, rather than a debt-based agreement.

How did you launch?

We’re very much a small community-led institution. The way we launched was quite remarkable. When we decided to soft launch in 2019, we didn’t have funding at the time.

Instead, we held a roadshow and went to three different parts of the country. We held events, we spoke to the community, people we’ve never met in our lives.

We said this is what we’re building, and it’s going to benefit us and our children and generations to come. If it’s something you want to see happen in your lifetime, you need to get behind us and support us.

We asked the community to give us Qard e Hasanah (interest-free loans) to be able to start doing business. And Subhanallah, the community rallied behind us,

Within the space of six months, we were able to raise around £800,000 pounds. People who gave us this money gave us a 10-year timeframe for repayment.

Alhamdulillah, Allah put us in the position where we repaid all the interest-free loans off nine years ahead of schedule.

I genuinely believe we have only got to where we are because of the support of the community, at every single level. I hope to keep it a community-led institution as we grow.

Is there a need for this finance model?

There’s a huge need for the product.

We’re showing the world that Islam has a very practical solution to a very real-world problem.

I love explaining our product to non-Muslims because when I explain our product to Muslims, this is something they’ve been waiting for decades. But when I explain it to non-Muslims, it’s something they didn’t even realise they needed.

You almost see jaws hitting the floor and people wondering why they’ve never been offered this before and why have they only ever been force-fed debt. Why is no one ever given them an equitable solution?

Especially in the current world, people are now more demanding of ethical products. This is just becoming what consumers demand now. I think there’s a huge opportunity here to show the world that Islam has become the solution in a way that’s not been seen before.

What’s at the very core of your company, and how has that grown since you started?

The whole reason for setting up Primary Finance was to provide a better way of doing finance and to challenge the current model.

Our vision is to encourage people to rethink what they demand from finance. I want equitable finance and equity-based contracts to be the norm.

We’re focusing on home finance and investment savings at the moment, but that’s not to say we wouldn’t do other products down the road.

We currently own 40 homes, which is still very small compared to other companies, but we’re continuing to grow alhamdulillah.

How does it work?

The way our product works is very different to a mortgage. Rather than lending money to our customers, what we do is buy the property with the customer as a partner.

Imagine if you and I were to buy a car together. We are both joint owners of this car. Similarly, we are joint owners of the property with the customer.

You can think of this as a part-by-part rent product where the customer owns 20% of the property, and they rent the remaining 80% from us. They’re welcome to rent that 80% for as long as they like.

However, most of our customers want to fully own their property. They can buy our timeshare if they wish to, although there’s no obligation.

Every month, the customer can choose to just pay rent, or they can choose to pay rent and buy a little bit of equity from us. Over time, as they purchase equity, they fully own the home.

Unlike a bank, if anything were to happen to the property, they wouldn’t care; you still owe a sum of money to the bank. With us, we are partners in the property, which means we both share that risk.

If anything happens to the property, we can’t suddenly enforce a debt on the customer, because that’s not how a partnership works.

On top of that, we want to empower our customers and help them take control of their financial destinies. We do that through our tech.

When our customers log into their app, they have a dashboard they can see all the metrics and information they need.

They can see their projections and their total cost profile. They can look at their past as well as future projections, and they can do the ‘what if’ analysis, which tracks their financial future if things change.

They can do it from their smartphone at three o’clock in the morning from their bathtub without having to speak to us. This is because they’ve got all the information and the app mechanics to empower them to make those financial decisions.

This is something that is unprecedented and has never been offered before. We’re essentially flipping finance on its head.

What happens if people cannot afford rent?

If you can’t afford your rent, you can actually trade some of your shares back to us. This gives you an enormous security buffer.

If someone lost their job without ever having made a payment, a 10% equity buffer would last a customer on average of 2-4 years of security.

So, if the worst-case scenario does happen, our customers don’t suddenly have to worry about their homes when they’re going through the hardest time of their life. Instead, they can focus on getting back on their feet whilst knowing that they have security in their home.

What would you say to people who believe Islamic finance is just interest renamed?

Up until now, there have been lots of Islamic finance products that have tried to reverse-engineer existing products. For example, Islamic banks would look at a conventional mortgage and say, right, how can we mimic this with an Islamic twist.

What we’ve done is we’ve built it from the ground up instead of trying to reverse engineer anything.

There is consensus amongst scholars that this product is genuinely halal. Our product has been reviewed and approved externally by the Islamic Council of Europe (Shariah Compliance Certificate no 1923416).

Other scholars have reviewed our product and are very satisfied with what we’re offering. This is because there is no debt element or obligation on the customer to buy our share.

It’s a very simple contract. There’s consensus that this isn’t just mimicking an existing product with an Islamic varnish on top. This is a genuine halal, pure product.

Testimonial of Imam Shams Ad Duha

What is at the heart of your business?

The community is at the heart of everything that we do.

I don’t just mean the Muslim community, but the cohort of ethically minded people demanding better from finance.

The way we’ve grown is by reaching out to people like solicitors, barristers, and lawyers who’ve seen our vision and shared their skill sets with us.

We’ve been incredibly blessed that the community have shared our vision and see the benefit that we’re trying to bring about. They’ve rallied behind us and helped us to achieve everything.

If you’re interested in learning more about Primary Finance, head to their website here.

*This interview has been edited for clarity*

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