Newark, April 16 (The Star-Ledger)--Financial planning can be tricky business for devout Muslims living in the United States. Tahir Zafar should know.

Two years ago, the 42-year-old Pakistani businessman discovered a newfound faith in God--and with it, just how difficult it can be to re-arrange one's financial affairs in accordance with Islamic law.

Consider the simple act of taking out a bank loan to buy a home or a car. Banks, by their very nature, charge interest--a taboo in the Islamic faith as damning as, say, adultery or eating pork. Doing business, then, with a bank or a money lender or a credit-card company is forbidden for practicing Muslims.

Zafar was leveraged to the hilt. He had all the above: the big, fat mortgage; the car loan; the credit cards; the checking accounts; stocks he bought on margin; even options, which are also prohibited, because Islam bans all types of speculative investments.

And to make matters worse--at least from a theological point of view--Zafar had earned his living for nearly 20 years as a banker arranging debt financing for private companies in eastern Europe and Southeast Asia.

In short, Zafar's soul was damned from just about every financial angle for doing what amounted to the devil's work, according to Islamic stricture. At least that's how he felt as he embarked on a holy pilgrimage to Mecca, Saudi Arabia, two years ago. The ritual pilgrimage to holy sites in Saudi Arabia is meant to purify the soul and in effect wipe your slate clean from any past transgressions and sins. There, in the searing midday heat, Zafar, clad in two-piece seamless white cloth--the traditional garb worn by worshippers in Mecca--had a spiritual epiphany and decided to clean up his financial act.

His solution: Get rid of it all.

Such thinking is a far cry from traditional Wall Street wisdom, which historically has had little room for religious vagaries. But Islamic investors, like Zafar, looking for alternatives to conventional Western financial services, are starting to emerge as a serious and growing niche market.

And the investment community is answering with alternatives. The demographic potential of the sector, after all, is huge.

Islam, with 1 billion adherents, is the world's second-largest religion after Christianity. And Muslims worldwide have plenty of money to invest--between $80 billion to $150 billion--a figure that's growing as much as 15% a year, according to A. Rushdi Siddiqui, director of the Dow Jones Islamic Market Index.

Unofficial estimates peg the number of Muslims living in the United States between 6 million and 10 million, with the average per-capita income ranging between $38,000 and $44,000. "It's basically a niche market whose needs are not being served," Siddiqui said.

At least until now. In the past year, a number of seminars, courses, and Internet sites have materialized devoted to Islamic investing in the United States. Last month, a new Islamic finance website,, went live with hopes of becoming the No. 1 Internet portal in the Muslim financial world. And in March, Dow Jones University, a division of Princeton-based Dow Jones & Co., which publishes The Wall Street Journal, began offering an interactive online course titled "Principles of Islamic Investing." Nearly 100 people registered for the eight-week course.

Siddiqui, one of four course professors, noted that Dow Jones University has offered eight interactive courses since opening its cyberdoors a year ago, and not a single one generated the same degree of global media attention as the Islamic investing course.

"This sends a message to people who recognize and respect what Dow Jones is about that the world of Islamic finance is coming of age," he said. Coincidentally, the heightened interest in Islamic finance coincides with a general rise in the number of socially responsible funds, particularly religious funds.

In the U.S., money in funds tailored along religious or ethical lines has increased 82% since 1997, totaling about $2.6 trillion, or about 13% of all money invested in the United States, according to the Social Investment Forum. And in the past five years, the number of religious-based funds has risen from six to 34, according to the fund-tracking firm Morningstar Inc., reflecting growing investor demand for fund options that honor their religious faiths.

One of the reasons for the boom: Many of these funds have performed exceedingly well in recent years, according to Emily Hall, an editorial analyst with Morningstar.

For example, The Amana Growth Fund, one of two funds that caters to Muslim investors in the United States, had a 12-month return of 102.46%, said Hall.

"It has challenged the theory that you are automatically making a bad investment choice if you invest according to your values," said Hall.

Dow Jones, the creator of the venerable Dow Jones industrial average, the most widely quoted market indicator in the world, launched its Islamic Market Index last year. The index tracks 650 companies that meet strict Islamic investment criteria and provides a much-needed benchmark for fund sponsors to follow. Before the index was launched, there were 40 global Islamic funds worldwide. Today, there are 85.

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