No interest? No problem.

Structuring Islamic  Finance Transactions coverOver the past few years, we’ve seen stories about Muslim rules prohibiting interest payments. Usually these stories are in a non-US context and deal with Muslim banking in general. But this wonderful Associated Press story looked at the issue in a distinctly American context:

Mohamed Nurhussien faced the usual challenges of a low-income worker trying to buy a home, with one big difference: As a Muslim he was forbidden by his religion to pay interest.

The 54-year-old Eritrean immigrant with five children thought his only option was to save enough money to purchase a home outright, with cash earned from his job at a security company.

Then he heard about Habitat for Humanity. For some Muslim immigrants like Nurhussien, the Christian homebuilding charity that offers zero-interest loans has become a real godsend.

The story looks at the growing number of Muslim families that have benefited from Habit for Humanity programs. The reporter also speaks with Samuel Hays, a Harvard Business School expert on Islamic finance.

Intermediaries often buy homes, then sell them to Muslim families with a markup that reflects a reasonable rate of return for the money that sellers have tied up in the property, Hayes said.

“It’s comparable to a mortgage with the interest rate built in,” he said.

The difference may seem minor, but to many Muslims, it is an important distinction because they believe God knows the difference, he said.

Imams such as Johari Abdul-Malik are also brought into the story. He says he learned about Habitat for Humanity programs when a Presbyterian minister friend invited him to a fundraiser:

“So many people in the promotional film that were building homes were Muslim,” Abdul-Malik said. “I said, ‘Wait a minute. Something’s wrong with this picture. Churches are stepping in and building Habitat homes for Muslims. We’re not going to stand by and not help build homes for others.’

“It really put a bee in my kufi.”

He’s now working to increase Muslim presence in Habitat leadership. How does Habitat, a distinctly Christian organization, feel about that? The AP asks and finds out that local directors have no problem. Nashville Habitat executive director Chris McCarthy reports:

She said she’s proud of the diversity of local Habitat neighborhoods and that little racial or religious tension is apparent among Habitat families. Most Muslim families even happily accept the Bible that U.S. Habitat groups traditionally give to new homeowners along with the keys.

For a somewhat brief story, the AP did a great job of looking at the issue from multiple sides and not leaving gaping holes. I hope we see more such stories on finance and religion.

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  • Jerry

    It’s a very nice story of religious cooperation, to be sure, but it does not mention that private enterprise Islamic compliant banking does exist in the US. I wonder if the Muslims in the story did not know about such banks or did not have the income to qualify. I also wonder what more prosperous Muslims are doing when they go to buy a home. Are they following the Islamic dictates about interest or adopting the American model? How about second and third generation American Muslims? These are clearly too many questions for a single story. But I wish there had been at least a little bit about private banks in the story to help provide information for many who probably don’t know about such institutions.


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