My first exposure to Islamic Finance was about one year ago when I met a guy in college who was rather knowledgeable on the topic. He explained to me that he had taken a gap semester to pursue an opportunity running his own asset management firm. Clients would allocate a portion of their wealth to his firm, and he would invest on their behalf promising some level of return that ostensibly exceeded that of index funds or savings account interest payments. There was a twist, though. His clients expected that the investment of their money be strictly compliant with Sharia law. Short selling, derivatives trading, and investing in vice companies (e.g., those dealing with alcohol, gambling, pornography, etc.) were all strictly ruled out from his investment strategy.

“How could you possibly compete with conventional asset management firms who were using these forbidden investment instruments and reaping substantial rewards from them?”, was my first thought—my first thought as a pious Muslim, mind you, albeit one who was particularly ignorant to the Islamic financial paradigm at the time.

He then explained to me that he knew Muslim-Americans who followed these financial laws so stringently that they do not see it permissible to have a bank account in the U.S.—the mattress is a sufficient store of wealth if it means avoiding entities that engage in interest. By this, I was absolutely floored. How could someone operate financially in this country without using a bank? I had had a bank account since I was in middle school. As far as I had been taught, and as far as I had observed among my non-Muslim peers (and most of my Muslim ones), it was basic financial literacy to understand the role a bank plays in everyday finances. And to take advantage of those resources is to be financially responsible. Yet here I was, being told that these very practices which I thought made me a responsible adult were actually fundamentally forbidden by the religion of which I considered myself a devout follower.

After the typical aversion to status quo dissipated, I became more and more interested in what an Islamic alternative to the conventional financial system would entail. Mortgages, automotive leases, health insurance, student loans were all technically religiously forbidden for the 3.45 million Muslim-Americans living in the United States. To the entrepreneur, however, this statistic merely applies an additional constraint to typical financial and fintech business problems. For each of the previously listed financial products for which solutions already exist, we must now look to create alternative solutions that comply with the values of the Muslim-American market. What I used to perceive as a marginal group of financially disadvantaged Americans, I now view as an untapped market—a blue ocean—which Islamic Fintech companies should enter with urgency.

The Muslim customer base (which is only a subgroup of the Islamic finance market, I’ll touch on this more in a bit) can be split into three major groups: those who avoid conventional financial products and are actively seeking alternatives, those who use conventional financial products but wish for a permissible alternative (at a comparable value, too), and those who use conventional finance products and don’t see an issue with it (whether that be due to cognitive dissonance or following a more relaxed or unorthodox religious ruling). Addressing each of the market segments would require a financial product with bare-minimum benefits (”anything is better than getting involved in interest”), a financial product with comparable benefits to its conventional alternative, and a financial product with much better benefits than its conventional alternative, respectively. The latter standard is obviously the best goal to aim towards, while characteristically being the most difficult to achieve, especially while engaging only in ethical financial practices.

It is also important to understand that the ethics on which Islamic finance is based should pique the interest of any consumer of financial products (so, practically everyone), regardless of faith. The fundamental tenant of Islamic finance is to ensure risk-sharing between the two parties involved in the financial transaction. One party (usually the financier, e.g., bank, VC, insurance company) should not be absolutely absolved of risk as a result of the other party assuming it. To put it simply, either both gain or both lose. It’s only fair. This incentivizes a healthy increased scrutiny in selecting the recipients of financial instruments; scrutiny which we can retrospectively and unanimously agree that the lack thereof was a major catalyst of the 2007 global housing crisis.

Risk-sharing sets a foundation on which other ethical financial practices can replace their conventional counterparts. Interest-bearing loans are replaced with asset-backed contracts that can be paid back in installments or as a lump sum. Until it is paid off, the asset is proportionally owned by both parties, and thus any calamities that befall the asset affect both parties, proportionally. While a defaulted loan repayment incurs late fees or, God forbid, the precipitous fees of compound interest, an ethical asset-backed contract specifies the total amount owed at the time of the contract’s signing—a customer’s default is a risk that the financier accepts rather than profits from.

The more I read about Islamic Finance and its untapped market in the U.S., the more bullish I become about the future of the space. While I can concede that competing with the big U.S. banks on the basis of providing an ethical alternative to their financial products is a bit far-fetched short-term, I can’t seem to find a convincing reason why a suite of fintech companies couldn’t sufficiently meet the financial needs of the Muslim-American market. And of course, any seeker of a higher ethical standard in their day-to-day finances will be welcomed with open arms.