I was sitting with my father, Bashar, and my mother, Fadia, trying to figure out a way to finance my college education without the use of interest-bearing debt. My motivation to avoid interest-bearing debt was twofold: On one hand, I wanted to avoid the psychological and financial burden of taking out loans and the pressure of knowing that I was committing to making fixed payments in the future before I knew if I would be able to afford those payments when they became due. On the other hand, as an observing Muslim, I wanted to avoid using interest-bearing debt because it is prohibited in Islam.
After some thought, my father proposed a unique financing arrangement between us. One that would alleviate both of my concerns. In it, he offered the financing I needed to pay for my education in return for a fixed percentage of whatever I earned after I graduated for a fixed period of time in which I was working.
Long story short, the arrangement worked. I was able to receive financing, avoid the risks of loans and observe my religion’s prohibition on interest-bearing debt. As an investor, my father was able to help me get my education while making a smart investment with his money that took into account his upcoming retirement needs.
After having a great experience with the product, I thought, why not share this product with the rest of the world? I knew that there must be others who would also like to receive financing with payments that were designed to stay affordable as well as other Muslims who would like to observe Islam’s prohibition on interest. So in 2017, I started Bashar & Fadia’s financing (also known as “BFF”) after my parents who came up with the idea. I then realized that the initials BFF where commonly known to stand for “Best Friends Forever” which I found befitting since I perceive people who receive financing from us as financial partners and I hope they become repeat customers and return to us for all their financing needs. (I know that’s kind of corny but I can be that way sometimes 🙂
So how does our financing work?
Step 1: Someone needs money for whatever reason e.g. pay off credit card debt, make improvements to their house, pay for a class they’re taking etc. They fill out our application for funding.
Step 2: If their application is approved, we work with the applicant to come up with the terms of funding.
Step 3: We provide the applicant with the money they need. In return, the applicant commits to sharing with us a fixed percentage of whatever they earn for a fixed period of time.
Step 4: Applicant makes payments to us in amounts that equal the agreed-upon fixed percentage of their income for the agreed upon fixed period of time in which they are working.
Consider the following example (keep in mind the numbers in the example are purely hypothetical, actual terms will depend on the merits of each application):
Let’s say you need $25,000 to pay off your credit card debt. We project that you will earn, on average, $100,000 a year for the next 5 years. We enter into a funding agreement with you wherein we provide you with the $25,000 you need to pay off your debt and in return, you share with us 6% of whatever you earn for the next 5 years you’re employed.
If our projection for your income i.e. $100,000 annually, is correct, we earn a profit of $5,000 ($100,000 X 6% = $5,000) over 5 years. If our projection isn’t correct, we may not earn a profit and we may even lose money depending on how low your average income ends up being.
It’s that simple.
Now, some may have a negative reaction to the concept of committing a share of their income. What if their income beats all expectations and rises significantly. To that I would say the following: first, if that happens that’s great! This means you’re doing amazingly well for yourself. If you’re sharing 6% of your income with us, you’re keeping 94% to yourself, so let’s celebrate! Second, we do offer our customers the ability to buy us out of our right to share in their income at any time and we provide a schedule with pricing on how to do this when we initially make them an offer.
Further, committing a share of your income actually isn’t anything new. When you decide to take out a loan, you are committing a share of your future income. The problem is that when you take out a loan since your payments are fixed when your income goes down and you can’t afford to pay as much, the percentage of your income that you owe actually goes up. On the other hand, when your income goes up, and you can afford to pay more, the percentage of your income that you owe goes down. This is exactly opposite to how you want it to work. Accordingly, we’ve flipped this dynamic on its head; instead of fixed payments and a changing percentage of income owed, we offer a fixed percentage of income owed and changing payments.
How much do we cost?
Our target return will always correspond with how risky an investment we think you are. So if you are a risky investment, with questionable prospects of earning a steady future income, then the rate of return we target, if we do decide to invest altogether, will be higher than someone who has a steady income, proven work history and works in a profession that has clear future income-earning prospects.
It’s really not fair to compare us to a loan, because we are not a loan (we don’t require the principle we invest to return to us). Our profit is not interest either because we don’t contractually require that we earn a profit. We are taking the risk of loss. So comparing us to a loan is just Apples and Oranges.
Additionally, when we invest in someone, we are binding our well-being to theirs. As a result, we have a vested interest in seeing them do as well for themselves as possible. After all, the better they do for themselves, the better we do. Accordingly, we offer any connections, interview preparation, resume review, career advice and basically anything we can to advance our investees careers. We are essentially agents of the investee. This is something you won’t get with a lender-borrower relationship.
Having said all of this, on average, we are less expensive than any equivalent unsecured loan.
Is our product Halal?
We certainly think so. It is a straightforward partnership wherein one party provides money and the other provides labor and the two partners share in the fruits of the labor. This is commonly known as Mudarabah. Granted, perhaps things haven’t been done exactly as we are doing them in the past. This doesn’t mean it’s Haram. The default for everything in Islam is permissibility. If you would like to prove something is Haram, you have to reference a text from the Quran or the Sunnah that disagrees, at least in spirit, with the matter in question. I have challenged anyone to find any shariah violation in our product and believe me I’ve spoken with hundreds of people and no one was able to produce a valid violation from the Quran or Sunnah. This challenge is still open and I encourage anyone to provide such violation in a public format so that the response can be in public as well. I have also provided responses to every possible objection imaginable.
So our product guarantees affordable payments, is Halal, on average is less expensive than loans, allows penalty-free early settlement and aligns the well being of the financier with the financed. In every way, our product is superior to interest-bearing loans! So I encourage you, if you have any financing needs, to consider our product (Currently, only offered in the United States, restrictions may apply).
You can also reach out to me if you have any questions about the product firstname.lastname@example.org