Bridging ethical finance: How earned wage access harmonises with Islamic values

IN TODAY’S financial world, many individuals work hard but still face surprise bills before payday. This often leads to relying on high-interest loans or payday advances, which can make things worse. However, there’s a growing focus on ethical finance, aiming for fairness, openness and community well-being. Islamic finance, based on Shariah law principles, embraces these ethical ideals. It aims to build fair economic systems that prioritise responsible money practices. Earned Wage Access (EWA) fits into this approach exactly. EWA—rooted in Islamic values—offers a modern answer to money challenges while staying fair and responsible. At Paywatch, EWA lines up with the ethical principles of Islamic finance, providing a fresh option for handling today’s money issues. An ethical framework for modern finance Islamic finance isn’t just about banking; it’s a way of life that emphasises ethical conduct in financial transactions. Rooted in Shariah principles, it offers a framework that prioritises fairness and shared prosperity.EWA, as a modern financial solution, mirrors the ethical principles of Islamic finance by providing access to earned wages before payday, EWA promotes fairness and alleviates financial stress without resorting to exploitative practices like high-interest loans. As Shariah advisory and Principal, Masryef, succinctly puts it, “EWA embodies the essence of Islamic finance – providing financial assistance without exploitation.” The firm also added that “Integrating Islamic finance principles like EWA into modern financial services fosters ethical finance by promoting fairness, transparency, and social responsibility. It ensures that financial transactions are conducted in accordance with Shariah principles, contributing to a more inclusive and equitable financial system.” A lifeline for financial well-being Kim believes that Paywatch is more than just another financial tool, it’s also a social impact platform that works with employers and reputable financial institutions to create a positive, sustainable impact on the financial health of employees across Asia.Now, consider a situation where an individual has been working diligently for half a month, and they need some funds now but their paycheck is not due until another half month. Enter EWA, a service which allows you to access a portion of your already earned wages before your actual payday. This is a game-changer, helping you cover unexpected expenses without resorting to predatory loans. Companies like Paywatch are at the forefront of integrating EWA into the fold of employee benefits. Here’s how EWA aligns with Islamic values: > No interest: Paywatch keeps their withdrawal fee nominal at a mere RM2, avoiding exploitative interest rates. > Transparency: The process is clear—you know exactly how much you can access and what fees apply at any given time. > Tangible value: You’re not borrowing money that’s not yours, you’re simply accessing what you’ve already earned. This approach is not just ethical, it empowers employees to manage their finances better for a more sustainable cash flow. They can better manage their finances, reducing stress and improving their overall well-being. Additionally, Paywatch has introduced a completely free novel bill payment feature, aligning with principles of financial responsibility and environmental, social and governance (ESG) considerations. With a focus on necessities like water and phone bills, this free feature promotes responsible spending while offering convenience and peace of mind. By facilitating direct bill payments with earned wages, Paywatch empowers users to manage their finances prudently, reducing stress and enhancing overall well-being. Ethical finance in action The impact of EWA within a Shariah-compliant framework extends beyond theory to tangible benefits for users and businesses alike. Companies such as QSR, DFI Group, MUI Group, Lotus’s and Jaya Grocer have integrated EWA in their payroll systems, witnessing: > Enhanced employee satisfaction: By alleviating financial stress, EWA fosters a happier and more productive workforce, leading to increased job satisfaction. > Improved employee retention: When employees feel valued and financially secure, they’re more likely to remain with their current employer, reducing turnover rates and associated costs. > Elevated company performance: A contented workforce translates to improved overall company performance, with higher productivity and better customer service. These real-world examples underscore the efficacy of ethical finance in action. By combining EWA with Islamic principles, companies like Paywatch create a mutually beneficial environment for employees, businesses, and society at large. “In one word, Paywatch is a lifesaver. If there’s an emergency and I don’t know what to do, I rely on Paywatch. It helps me to manage my responsibilities. This is why we rely on the ability to access a bit of our own wages rather than waiting for payday at the end of the month,” says 23-year-old Lotus’s warehouse clerk Ahmad Syafiee. Addressing challenges and seizing opportunities While EWA presents promising solutions, it’s essential to acknowledge and mitigate potential challenges. Concerns about overdraft fees and responsible usage require careful consideration. Moreover, as regulations for Shariah-compliant EWA services continue to evolve, ensuring compliance is paramount. “Challenges may include regulatory compliance, technological infrastructure, and consumer awareness. To address these challenges, collaboration between regulators, fintech companies, and Islamic scholars is essential. Additionally, robust Shariah governance frameworks and educational initiatives can enhance trust and facilitate adoption,” says Masyref. However, amidst these challenges lie significant opportunities for innovation. Collaboration among financial institutions, businesses, and regulators can pave the way for a robust framework for ethical EWA services, aligning with Shariah principles. This collaborative effort holds the potential to revolutionise financial management, fostering a more just and equitable system. To mitigate risks and promote financial well-being, EWA providers like Paywatch can implement responsible usage guidelines. By adhering to regulatory standards and leveraging features like nominal fees and bill payment services, EWA providers uphold Shariah principles while offering users convenient and responsible financial solutions. As a bank-regulated entity, Paywatch is committed to promoting ethical finance and empowering users to manage their finances responsibly. Ethical finance for a more inclusive future The integration of Islamic finance principles with EWA services holds immense potential for the future of ethical finance. By prioritising fairness, transparency and shared prosperity, we can move towards a financial system that empowers individuals and builds stronger communities. As we continue to explore the possibilities of this synergy, we can drive positive societal progress and economic empowerment through ethical finance. This isn’t just about money; it’s about creating a financial ecosystem built on trust, respect and shared responsibility. As EWA and Islamic finance principles converge at a crucial nexus, we have the chance to redefine financial wellness for all. Let’s embrace this opportunity to build a brighter future where everyone has the tools and resources they need to thrive. Richard Kim is Paywatch Malaysia Sdn Bhd co-founder and chief executive officer. The views expressed here are the writer’s own.