Guidance’s Islamic Finance Proficiency
Guidance Financial Group embodies a deep understanding of the history, philosophy and implementation of Islamic ethical principles, codified as Shariah law, and the practical and religious benefits they provide to all parties in business transactions.
We create and develop investment opportunities for Islamic institutional investors and new financial products for under-served Muslim consumers in close consultation with seven highly respected Islamic scholars. They constitute our Shariah Supervisory Board. Each of these scholars has served on the Guidance Supervisory Board since Guidance’s inception.
The Shariah Supervisory Board, together with Guidance’s management, tests the structure of all Guidance investment funds and products and their underlying practices and assets. This close scrutiny and auditing of all Guidance-affiliated products provide full confidence to institutional investors, partners and consumers that their religious and ethical beliefs have been observed and respected in every product and service offered by Guidance.
Justice M. Taqi Usmani, Chairman of the Guidance Shariah Supervisory Board, wrote in his 2002 book on Islamic Finance: “Muslims… are striving for the revival of their Islamic identity to organize their collective life in accordance with Islam and teachings. In the economic field the biggest challenge for Muslims was to reform their financial institutions to bring them in harmony with the dictates of Shariah.”
The ethical purpose of Islamic law for business is the protection of the rights of all parties to a transaction and the elimination of possibilities for exploitation by either party. Shariah law seeks to prohibit all sources of “unjustified” enrichment and any transactions that involve speculation or contain excessive risk. Shariah law additionally exhorts Muslims to observe the principles of trust, equity, balance, fairness, and benevolence in all business dealings.
The mostly widely known aspect of Shariah economic law is the proscription of interest, which is viewed as an unfair profit for a provider of capital and a possible means for exploiting the party needing capital. Shariah holds the view that cash is not a tangible asset and therefore is not deserving of a return.
Thus, in a Shariah-compliant home financing product provided by our U.S. consumer finance company, Guidance Residential, interest is avoided by financing a home purchase through a contract in which both parties have a partnership equity interest in the residential property.
The home buyer is given added protections not commonly found in conventional mortgages because Guidance Residential’s financial products are Shariah-compliant. For example, there is no charge for interest on late payments, or recourse to the buyer’s other assets if the property must be foreclosed. Although 12 states in the United States require non-recourse provisions in residential first mortgages, 38 states do permit conventional lenders to have recourse to other assets of the borrower in the event of a foreclosure. This consideration of the needs of people who fall on difficult times is a fundamental aspect of the ethical basis of Shariah law.