Please find below Dr. Ahmed Badreldin’s opinion of BFF’s Income Share Funding contract:

It is worth noting here that Dr. Ahmed Badreldin is not affiliated with BFF Income Share Funding nor was he compensated either directly or indirectly for his opinion.

 

First, a brief bio for Dr. Ahmed Badreldin:

Assistant Lecturer at the Departments of Finance and Banking as well as Economics of the Middle East at the Philipps-Universität Marburg in Germany. Dr. Badreldin completed his Ph.D. in the field of Asset Pricing and Islamic Finance in 2018. In 2013, he was awarded a DAAD Scholarship to complete his second Master’s degree in Economic Change in the Arab Region from the University of Marburg. His fields of research are Islamic finance and asset pricing in mixed market settings as well as the economics of the Middle East with a focus on Shadow Economy and Monetary Policy. He has written extensively in several publications such as the International Journal of Islamic Finance as well as a co-authored chapter in a recently published book on Islamic Banking and Financial Crisis.

 

On BFF’s funding contract, Dr. Ahmed Badreldin says the following:

“Having reviewed the BFF Funding Agreement in its entirety with its latest version being on the 3rd of April 2020, I can express my personal opinion on it confidently: In my personal opinion, I can recommend this product for use by anyone needing funding with no reservations or restrictions from a financial or Shariah point of view.

Briefly, the contract states that BFF immediately offers funding to an investee in return for a fixed percentage of their future income for a limited period of time. This fixed percentage is clearly and transparently set at the start and does not vary over the lifetime of the contract. The resulting payments (the set percentage multiplied by the actually earned investee income) vary as the income and employment status of the investee varies: In case the investee receives a higher salary, the amount paid is increased accordingly. In case the investee faces a legitimate reduction in income, the amount paid is reduced accordingly. In a worst-case where, for example, an investee is laid off, BFF is contractually obligated to defer any payments up to a period of two years thereby sharing in the risk of the employee losing their primary source of income and providing a sufficient grace period.

This stands in stark contrast to a conventional interest-based personal loan where the bank requires interest payments during both positive and adverse economic situations equally, thereby isolating the bank from sharing in the profit or risks of the borrower.

With the funding agreement being as described above, it proposes a simple profit-sharing (Mudharabah) agreement where both parties share in profits during positive economic situations and bear risks of adverse economic situations, thus applying the dictates and teachings of Shariah. The profit-sharing nature of this contract reflects the essence of fairness and Shariah-compliance with respect to financial dealings and ensures that no party is taken advantage of due to their financial position in the contract. In this sense, BFF is a fair investor: Fair in the sense that both parties’ fates are tied together.

In addition to the profit-sharing nature of the contract, it further ensures Shariah-compliance through specific characteristics reflected in the articles of the contract:

  1. The contract is transparent concerning the portion of income to be paid, the term of the contract, cases that allow deferment, the definition of full-time employment, the definition of future income, the conditions for an early exit/buy-out as well as its non-inheritance feature. In this sense, it removes ambiguity and uncertainty in the furthest extent possible.
  2. The contract states unequivocally that any late fees charged are not to enrich the company, but instead must be donated to charities. Therefore, the aim of late fees is only to ensure compliance with the contractual agreement.
  3. The contract puts BFF in a position to only want the best for the investee, since only in this case would BFF benefit economically, i.e., a partnership for a common goal. The contract emphasizes the need for BFF and the investee to be in contact in order to deal with any unforeseen circumstances.”