STRUGGLING TO FIND DECENT
Finding solid investment opportunities which are halal is not as straightforward as it should be.
Most mainstream investment products such as fixed income products, bonds, peer-to-peer lending, fixed savings accounts, treasury notes are all interest bearing, and therefore impermissible (haraam).
Muslims who are mindful of their faith, need to look much harder to find good opportunities, and often when they find some, the returns are shockingly modest.
To help you navigate this complex space, full of pitfalls, here are 5 investment options you should consider and look into further:
1. Off- Market Opportunities with Large Developers
This involves investing with large developers who have a long history and strong track record.
Often this involves purchasing units before the building work starts (or while they are being built) and you can sell on for a higher price once the development is finished. This is often done through a mechanism called Assignable Contracts.
We particularly like this type of investment and we have some fantastic developers we invest with, which have been delivering 25-40% annual returns consistently, over the last 6 years.
2. eCommerce Businesses
You may have noticed how Amazon is slowly taking over the world of commerce. If you are anything like us, you probably do more than half of all your purchases through their ever growing platform.
There are more than 5 million sellers across all of their platforms, and there is a growing number of Muslims leaving their day jobs and starting businesses on the Amazon platform. You have probably seen so many ads about this in the last few years!
Many of these muslim sellers are actually doing very well and need periodic injection of capital to keep expanding their product ranges. A few years ago Tanim helped a close friend raise around £50k for his amazon business, which was executed through an investment offer (Murabaha Agreement) of 20% return over 12 months. Investors would get a profit share from the stock which was bought with their cash. The business has grown a lot since then and his brands are now doing £80k-£100k sales per month.
There are many such solid and credible businesses looking for periodic investment and we think this is a great opportunity to not only grow your own money but to also help someone else grow their business. Let us know if you want us to put you in touch with some of these business owners.
3. Small/Medium Property Developments
Real Estate is always going to be one of the preferred investments, so if you are someone who likes solid bricks and mortar, you may want to consider getting involved in property development.
There are some companies now trying to do this without any leverage (interest bearing loans) by raising finance through investments. These type of projects involve purchasing land and building on it or purchasing an existing piece of real estate and developing it further.
We have met companies doing projects as big as 30 houses to as small as a single house extension. Returns vary between 10-35% on the type of project but the timelines tend to be anything from 8 to 16 months.
4. Investment Crowdfunding Platforms
There is an exciting trend of late, where Crowdfunding has become a massive force for good in the world.
There are now many companies using the crowdfunding concept to raise funds for all sorts of ventures, from funding start-ups, to charity projects to real estate portfolios.
Not all of these are Shari’ah compliant so be very careful and scrutinise the small print closely. Returns tend to be in the range of 5-10% per annum, and often it is possible to compound.
For those interested, we can recommend some good options.
5. Start-ups by experienced and professional founders
More and more professionals are leaving their corporate jobs to pursue their dream of starting their own companies, adding unique value to the marketplace and solve a particular pain point in the world.
There are many routes to raise funding for such a project and offering equity to retail investors is sometimes preferred over going for seed funding or angel investors.
Investing in a new disruptive idea is always exciting but you must clearly understand that investing in startups is high risk and high reward.
You may want to consider allocating a small portion of your portfolio to this type of investment as the long term potential can be, in some cases, truly outstanding. Especially if you strongly believe in the vision of the company and the ability and commitment of the founder/s.
We have come across very few credible opportunities that we would consider investing in, some of which projected 200-300% growth in value over 3 years (average 66.7- 100% ROI per annum).