Sharia and start-up struggles

Feb. 26--Many business concepts begin with a market problem. For partners Aqil Jones, Saiyd Muhammed, and Ladia Hinton, it was a design flaw in the standard-issue niqab, or Islamic face veil -- which, it turns out, is ideal for maintaining modesty, but less so for eating or drinking.

Their solution: The ZipNiqab. Instead of lifting, flicking, or tucking her veil, a woman can zip it open and snap the fabric in place behind her head for hassle-free dining.

In 2011, they tapped their savings, ordered the first run of ZipNiqabs, and began selling them to clients in Europe, Asia, and here in Philadelphia. But when the most popular colors sold out -- leaving only a pile of niqabs in colors like pink and white in their stockroom -- they ran into a new problem, one they haven't yet solved.

"We don't have enough supply for the demand," said Jones, who now doesn't have enough money to replenish the stock of dark-colored veils. "With our religion, it's not permissible for us to get loans from the bank, so it can be a problem for us to finance production."

As Jones learned, building a start-up as an observant Muslim in Philadelphia presents unique challenges, from identifying financial practices acceptable under sharia law, which bans interest-bearing loans, to deciding whether and how to compromise on selling forbidden wares such as pork, lottery tickets, and -- if liquor sales were ever privatized -- alcohol.

But it also, as the ZipNiqab shows, presents unique opportunities. Among them could be a market for the region's first Muslim credit union.

A coalition of businessmen who 20 years ago attempted to open such an institution -- but ran out of gas inches from the finish line after failing to obtain federal deposit insurance -- believe the time is right to revive that effort.

"2014 is the year, no question," said Aqil Sabur, who helmed the effort in the 1990s and is now leading its renewal. In the interim, he held a variety of public- and private-sector roles, including at the helm of the Philadelphia Commercial Development Corp., which was shuttered by the Nutter administration in 2009 following claims it had mismanaged its lending.

"Twenty years later, the 8-year-olds are 28-year-olds, the 35-year-olds have children with families, and they have the same exact concerns: How to buy a house without paying interest, how to finance their businesses, and basically just how to live a normal lifestyle within the tenets and commandments of their religion."

Sabur said the U.S. lags far behind other countries when it comes to the Islamic-finance sector, now worth $1.7 trillion globally, according to Ernst & Young.

A handful of American banks, such as Guidance Residential in Reston, Va., Devon Bank in Chicago, and University Bank in Ann Arbor, Mich., have begun offering sharia-compliant home mortgages. In lieu of interest, agreements may be structured as rent-to-own or as partnerships between bank and borrower, in which the borrower gradually buys out the bank's stake. But none of them are directly targeting this region's Muslims.

Sabur wants to offer the region's Muslims a holistic economic institution to address their broad spectrum of pragmatic concerns and spiritual mandates. For example, he said, adherents are ordered to pay a tithe, called zakat, and encouraged to establish trusts for their children and endowments for community institutions such as mosques. A credit union could assist with all of those transactions.

"The need is extremely critical," he said, "and it goes beyond financing."

G. Jamillah Pugh is a case in point.

"Our progress is kind of stagnated because we can't [take out loans]," said Pugh, 40. "We have to start smaller."

Take her house: Rather than seek a mortgage, a practice that Islam considers exploitative, she bought a cheap fixer-upper in North Philadelphia and lived there while rehabbing it.

Or, consider her husband's store, called If You Want It, We Got It, at Germantown and Erie Avenues. Pugh's husband and his brother spent 10 years as street vendors before partnering with a few other vendors and scraping together enough money to open up shop.

"When they first opened the store, they didn't have much in it," Pugh said.

As for Pugh herself, she quit her job outside the home when she got married, as tradition dictates. Since then, she's launched a series of home-based businesses: a lingerie line, a screen-printing business and, most recently, a halal cosmetics line, called Nafs, featuring hand and foot balm and perfumes.

Those, too, have been fraught with challenges, relying on payment plans from amenable vendors. Stocking enough inventory to grow her cosmetics business remains a hurdle.

"I would like to get my product in the supermarkets," she said. "But I have to have a certain amount of inventory and a display. That takes money, so for me it would be a slow, slow process."

That's not to say there aren't thriving Muslim-owned businesses here.

Marwan Kreidie, executive director of the secular Arab American Community Development Corporation, pointed to Steve Cousins, of Cousins Supermarkets. Kreidie said Cousins built his business without loans -- even declining the city's offers of low-interest financing. And, rather than sell pork products directly, Cousins sublets space to a pork retailer.

Miles Davis -- a native Philadelphian, Muslim, and dean of the business school at Shenandoah University in Virginia -- also downplayed the financing issue.

"You should grow your business through sales, not loans," he said. "The reason people take debt financing is because they don't want to give up shares of their business. The Islamic way of financing is to partner with someone."

He said there are alternatives: venture capital, micro-lending, investing circles, vendor payment agreements, and support from entities such as the Small Business Administration. "These are all viable means that sometimes the Islamic community self-selects out of, because they don't think they can be part of these things," he said. "It's a matter of information."

It's also a matter for debate, said Salima Suswell, a member of the Universal Muslim Business Association of Philadelphia and owner of Evolve Solutions, a community-engagement consultancy.

Suswell said she herself has a mortgage, and she knows Muslim business owners who have taken loans. She said it's only the most orthodox who eschew them entirely.

"It's all a matter of your religiosity," she said. "There is varied opinion on the subject."

Speaking of debates, Kreidie said a new one is on the horizon if liquor privatization passes in Harrisburg. Store owners have been organizing against the reform. Some believe they'd have to sell alcohol to keep up with competitors; others, as franchisees, fear that chains like 7-Eleven would insist on it.

Davis, though, said there's plenty of opportunity in Philadelphia for Muslims to succeed -- and that companies like ZipNiqab may be on the right track.

"I would compare this to the black American community before the elimination of Jim Crow," he said. "They opened up institutions that supported their needs. This is where the Islamic community should be headed."

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