Reconciling working in the cold world of finance with living a spiritually fulfilling life. An introduction by a man with skin in the game, SECRET MUSLIM BANKER:
I always wanted to be rich.
Ever since I was a young boy, I thought about making money. And it was all I could think about. Up until the age of 14 I wanted to become a commercial airline pilot. There was a certain prestige associated with the role and my mother instilled the idea in me from a young age. But a simple cost-benefit analysis rendered this an ineffective way to reach my financial goals. It required an expensive education and too much time to get a “decent” salary. My idea of a decent salary then was $250,000. Yes, I know what you’re thinking. But better to set the bar high, right?
That changed when I started studying economics and was introduced to the world of finance. That’s when I knew I wanted to become an investment banker. And It wasn’t always about money. I was intrigued by the social aspect and how humans create a system that acts in unison, to reach equilibrium, by acting in their own self-interest. I found this fascinating.
I dove deep into the subject knowing that I’ll use this as a steppingstone to become an investment banker or work in a hedge fund. The markets were fascinating to me. The idea of profiting from macroeconomic trading strategies was like a massive puzzle or a game of chess waiting to be played.
Fast-forward some years I now hold a senior position where I manage an investment fund. We’re not your typical investment fund but we still exploit inefficiencies although our strategy is market neutral. Market-neutral is just a fancy term to say that whether the markets go up or down, we still make money. But no, it’s not magic. We can still lose money.
With all of this I attributed my ‘success’ to perseverance, hard work grit, intelligence, and confidence. I know luck has a role too. I knew I was also lucky to be in the right place at the right time and to encounter the right people who pushed me in the right direction.
But how naïve to think it was all down to me. That I alone was responsible for reaching this level of success. I was blinded by my foolishness of arrogantly believing that it was all up to me.
What I failed to understand was that God, Allah, is the one who decides who gets what. And this was my rizq. For the non-Muslim readers, rizq can be understood as your sustenance, your wealth, your benefits, or goodness that we receive in our lives. In Islam, we believe that this is ultimately outside of our control.
It’s not uncommon to see people work extremely hard all their lives and not attain success. Or others putting minimal effort and still seeing everything work out. We just attribute this to luck. But in Islam, this would be rizq.
Now this doesn’t mean that one should just sit and wait for their sustenance to fall from the sky. In Islam we are taught the value of work ethic and to strive ambitiously but that we should be content with the outcome. Because only God knows what is best for us.
It is also a test as to what you will do once you have achieved and received what you wanted. Who will you then become? Can you keep your character in check after acquiring wealth? For some, it may be in their best interest not to attain a level of material success.
At this time, I wasn’t a stranger to Islam either. I considered myself Muslim. I observed Ramadan. At times I prayed. But that’s it. What I said, what I did, and what I believed in were not in line. I cared more about my desires. So, over the years my practice wavered as did my heart.
There would be periods where I was quite religious and periods where I wouldn’t even think about God and get up to all kinds of mischief. I’m sure you can use your imagination as to what a young good-looking guy can get up to. I’m joking. But not really.
It’s shameful to say and I know that one should not expose his sins, but I want the reader to understand that I was not a good Muslim. At all. Knowing what I know now, I think it was disrespectful to call myself a Muslim. A Muslim is one who submits to God. And I didn’t submit to God. I was submitting to money, girls and overall hedonism. But that’s now changed, alhamdulillah.
Money was my God
Now I don’t mean this in the literal sense. I’ve always believed that there is one God, and one God only. Allah. What I mean is that my belief was empty. I wasn’t acting upon this belief. They were just words.. I did not put my trust in Allah. I did not call to him. I did not thank him. I just went by my days, chasing my desires and thinking about money.
As I learn more about my religion and create a closer connection with God, I realize that the work I am doing is not in line with my belief and practices. I would be lying to myself if I thought it was ok to continue like this.
Whilst we don’t deal directly in riba (interest rates) there are some components that are impermissible from an Islamic point of view, and I realize that now.. I knew a while back that interest rates are considered impermissible in Islam – it is sinful to pay, receive, and be a witness to a contract that involves interest rates – but I lied to myself thinking it’s ok. I’m not giving out interest-bearing loans, so it’s not that bad. I can make my money and then leave.
But when what you say, what you do, what you think and what you feel are not in sync, you will never find peace. So, whilst I had nearly everything. I didn’t have peace. And that can’t be bought. Something needed to change. Even though we don’t deal with interest rates directly, some aspects of what we do would be considered impermissible. But it’s not only that. Finance is an industry where individuals care about one thing and one thing only: money. It doesn’t matter how they get it (as long as it’s legal – but this debatable and legal doesn’t mean moral, so any loophole will be exploited till infinity).
I get it. Everyone is ambitious and everyone wants to make money and we all want a better life. Don’t get me wrong, not everyone in this industry is evil. I work with amazing people, but the incentives make it so that morality comes second, and money comes first.
So ambition must be reined in. It can’t be at the expense of everything else. Life cannot be a zero-sum game. This will be a net-loss for the world. Look at the world as we know it. Look at the level of inequality. It’s only getting worse. Yes, we have progress but it is coming at the expense of what makes us human.
And I’m not saying that we should eat the rich. I’m not pushing a communist or socialist ideal. Hell no. I’m a capitalist. I’m an investor and a trader. I like to make money and I would always like to make money. The prophet Muhammed (peace be upon him) was also a businessman, and a successful one. Islam promotes capitalism, but a socially and ethically responsible one. Now, we can argue about what real capitalism is as new regulations are always introduced to reign in our animal spirits after every financial scandal but that’s for another time.
Not only that, but prophet Muhammad (peace be upon him) refused to establish price controls for produce that were in short supply because he wanted to tackle the root of the problem and not its effects. I’m sure capitalists would appreciate this laissez-faire approach. But capitalism must come with limits and I, as all Muslims believe, that God, Allah, has set these limits for us. We should aim for success and try our best. But we need rules as humans never learn their lesson. Again and again, we fall victim to our own hubris, and relive the tale of Icarus.
Money isn’t evil – the love of money is
So, I’ve decided to change things.
And I’m going through those changes right now, as I’m typing this, thinking what next? I’ve just decided to wake up and be true to myself, but I pray to God that he makes it easy for me. As someone who loves business, economic and financial markets, I know I can add value whilst doing something that is in line with my beliefs. This is why I want to dive deeper into Islamic finance.
For those that are new to Islamic finance, the main principle is that it does not deal with interest rates (as well as investing ethically – so banning allocation of capital towards harmful industries such as alcohol, tobacco, gambling etc.) and bans the commercialization of money. What I mean by this, is that you can’t make money by lending money. Money is not a commodity, it’s just a means to an end.
It also promotes profit-sharing and risk-sharing.
A traditional bank, when lending money against the collateral of the borrower, barely takes any risk. Whether the borrower succeeds or not, you can rest assured that the bank will be made whole. On the other hand, if the borrower invests the proceeds successfully and makes a huge return, they will only need to pay back the principal and a fixed amount of interest that was predetermined. That’s unfair to the bank.
I bet I got you there.
You think banks don’t need to be treated fairly? Well, that’s what Islamic finance is all about. Every single party involved in the transaction should be treated fairly, and every party should reap the rewards or benefits depending on the size of their investment.
You see, it requires a rewiring of the brain. It is no longer “OK, how do I maximize the return on this investment by not giving a single thought as to what happens to the other side as long as I’m protected” to “how do we make this a win-win-win transaction where buyer, seller and society benefits”.
It flips finance on its head.
Modern finance is predicated on extracting as much profit as possible but letting society deal with the negative externalities. Governments eventually catch up and impose new regulations in place but it’s always a game of cat and mouse. And no offense to government workers, but the smarter ones follow the money. Again, it’s our incentives-based system.
The issue is that a lot of modern Islamic finance is based on the conventional interest-rate based system. There hasn’t been much innovation. They just took what was done normally and slapped on some Arabic names. Et voila. So clearly this must change. It necessitates ingenuity, creativity, and pragmatism to deliver real practical solutions without compromising our beliefs. Some are already doing it.
And that’s what I want to be a part of.
Also by speaking to Muslims and realizing that many were left confused as to what is and what isn’t permissible regarding investments and/or financing, I realized that I could put my experience to good use. I’ve always had a knack for teaching, explaining, and breaking down complex topics in an engaging manner.
This is what I set out to do with Islamic finance. I want to make it accessible to all. And not only that. I also want to help Muslims better understand our economy and financial system from an Islamic perspective. From the perspective of another Muslim.
I want to use this platform to educate the public on what Islamic finance really is and how it can solve the economic problems we face today. The same problems that will exacerbate if we don’t fix them. But it requires challenging the assumptions that we take as given.
Like questioning interest rates. Compound interest is seen as the 8th wonder of the world, as quoted by Albert Einstein. A genius. But even his genius failed to meticulously dissect interest rates and their contribution to global inequality. So, I want to start by helping you ask the right questions.
This is for Muslims and non-Muslims alike. There will be a lot of references to Islam, the Qur’an and the Sunnah (i.e. the prophet Muhammad’s – peace be upon him- sayings and his way of life) that are paramount to understanding Islamic finance but this should not distract you from the message. I’m not trying to convert you. Or maybe I am?
Jokes aside. But I want you to try and understand, with an open mind and open heart, what Islamic finance really is. We can even call it something else, ethical finance or sustainable finance for all I care. I like the term spiritual finance for example. And bear in mind that I am no scholar. I am just a practicing Muslim who has many interests and has something to share with the world.
Just another guy that wants to do something with purpose. To make it a better place. One article at a time and who knows where this could lead. I’ve always wanted to tap into my creative side, so here it goes.
For more from SMB, you can follow him on Twitter @SecMuslimBanker. He currently writes on his blog, secretmuslimbanker.com