Breaking Free from Riba: Islamic Finance, Wealth Building and Halal Mortgages
In a world where interest-based financial systems dominate, many Muslims struggle to find ways to grow wealth without compromising their faith. The reality of riba (interest) infiltrates nearly every aspect of modern finance, making it essential for Muslims to understand how to navigate their financial lives within an Islamic framework.
Dr Sajid Umar, an expert in Islamic finance, joined OnePath Network to share key insights on building wealth, avoiding riba, and fostering a financial system that aligns with Islamic values. His discussion shed light on how Muslims can work together to create ethical financial solutions that benefit individuals and the broader community.
Islamic Finance: A System Rooted in Justice
Islamic finance is not just about avoiding interest—it’s a comprehensive system designed to ensure fairness, risk-sharing, and ethical wealth distribution. Unlike conventional finance, which prioritises profit at all costs, Islamic finance is centred around creating value. The goal is not just financial gain but fostering community stability and economic justice.
One of the biggest challenges in the current financial system is the reliance on riba. Interest-based loans create cycles of debt, disproportionately benefiting lenders while burdening borrowers. The Islamic model offers alternative structures, such as profit-sharing investments, partnerships, and ethical lending practices, ensuring that wealth is generated fairly and sustainably.
The Homeownership Dilemma: Renting vs Buying
A major concern for Muslims living in the West is homeownership. Many believe that the only way to secure financial stability is to purchase a home, yet conventional mortgages involve riba. This dilemma leaves Muslims with two main choices: rent indefinitely or explore halal alternatives.
Dr Umar highlighted the importance of thinking beyond individual wealth and embracing collective solutions. He proposed community-based financial models, such as family funding pools, where relatives contribute towards purchasing a home and structure payments in a Sharia-compliant manner. Similarly, diminishing Musharaka contracts allow buyers to gradually own a home while paying rent on the portion they do not yet own.
While halal mortgage options exist, they still require scrutiny. Many so-called “Islamic” financial products are simply reverse-engineered versions of conventional loans, raising concerns about their authenticity. This underscores the need for continued innovation and investment in truly Islamic financial models.
Insurance and Ethical Financial Security
Another complex issue is insurance. Conventional insurance operates on uncertainty and speculation, making it akin to gambling, which Islam prohibits. However, in cases where insurance is legally required or where the absence of it would lead to severe financial hardship, scholars have permitted it under necessity.
Dr Umar emphasised the need to create Islamic alternatives to insurance, such as cooperative models where communities pool resources to assist members in times of need. These systems, inspired by early Islamic traditions, promote collective responsibility while avoiding the ethical pitfalls of conventional insurance.
Investing in the Ummah’s Future
The conversation ultimately pointed to a greater issue: Muslims must take charge of their financial future. Instead of merely avoiding riba, they should actively build ethical industries, support Muslim entrepreneurs, and develop financial institutions that align with Islamic principles.
The key takeaway is clear—Islamic finance is more than just a set of rules; it’s a vision for a just and sustainable economy. By prioritising value creation over mere profit, Muslims can build a financial system that benefits both individuals and the wider community, ensuring economic empowerment without compromising faith.