News / Economy

    Sharia Financing Helps US Muslims Achieve Home Ownership Dream

    Mana Rabiee
    Khadijah Sahak, 59, sits in the family room of her neatly-kept townhouse in Sterling, Virginia. The Afghan news program broadcasting from her wall-mounted flat-screen television is discussing the Taliban.

    This leafy Washington suburb is a long way from the refugee camp in Pakistan where Khadijah’s family says they lived after leaving Kabul in 2002.

    “We like the house very much,” she says in Dari, adjusting the white headscarf draped loosely around her face. “We are very comfortable here. We are at peace.”

    It is a peace Khadijah thought she could never enjoy in the United States.
     
    When her grown son, Nabi, offered to help his parents buy a home, Khadijah and her husband refused to live in a house bought with a traditional mortgage.

    As practicing Muslims, they believe demanding or paying interest on money - like the kind paid on a home loan - is prohibited by strict Islamic practice.

    “Everyone in my family was, in one way or another, against the idea of conventional mortgages,” says Nabi.  

    A piece of the American Dream

    Then he heard about the Michigan-based Ijara Loans, one of a handful of Islamic financing companies in the United States. They've tapped into a niche market of devout Muslim-American homebuyers by offering “Sharia compliant” home purchasing contracts which do not include actual interest.

    “That day they got really excited, when they learned that they were able to still buy a house and not compromise their religious values,” Nabi says of his parents.

    When the Sahak family bought the Sterling townhouse in 2010, they joined about 10,000 other Muslim-Americans who've purchased homes in the past 10 years using Sharia-compliant financial transactions.

    Guidance Residential, based in Reston, Virginia, is the largest company in the United States which offers Sharia financing. At its spacious headquarters, phone operators manage calls from customers mostly in a mix of English and Arabic.

    Spokesman Hussam Qutub says the company has processed $2.3 billion in Islamic home financing transactions since it launched in 2002.

    “Relief that it does exist is definitely the feeling among the majority of the people who contact us,” Qutub says. “We are in a sense impacting the ownership rates of Muslim-Americans in a positive way.”

    'Sharia' financing

    Instead of charging interests on a monetary loan, Islamic finance companies generally offer homebuyers a sale, rent or partnership contract on the home.

    In the sale model, the Islamic bank purchases the home, immediately sells it to its customer at a mark-up and the customer pays the bank in installments, according to Georgetown University law professor Babback Sabahi, who lectures widely on Islamic financing.

    In the rent model, the Islamic bank purchases the home and rents it to the customer in a rent-to-own type agreement.

    In the partnership model, says Sabahi, both the Islamic bank and customer purchase the home together. The customer gradually purchases the bank’s share of the home while also paying a fee for occupying the house.

    “In order to be done right,” says Sabahi, “the bank needs to truly purchase the asset, own it and then transfer this ownership to its customers. And a trade - as opposed to lending in the conventional sense of the word - is what Sharia signs off on and approves.”

    The arrangement works for devout Muslim-American homebuyers because Islam does allow making profit on a trade transaction or the sale of a commodity - in this case the house. The buyers never feel they are paying interest on money.  

    “We feel we’ve only scratched the service here…with this niche market.” says Qutub of Guidance Residential. “There [are] still plenty of consumers out there of the Muslim faith that don’t even know this option is available.”

    Keeping the faith

    Sharia financing in the U.S. has accounted for less than $3 billion in home sales over the past 10 years - a small fraction of the total U.S housing market. But Islamic finance companies are making the American dream of home ownership come true for more and more practicing Muslims, like the Sahaks.

    “If I can live in America and feel that I own a home that is completely in line with my Islamic system,” says Nabi, “then I guess the pleasure of living in that house would be tenfold.”

    “We were very happy that we found an Islamic bank,” Khadijah chimes in. “We didn’t like the other banks. If we want to buy another house it will be from an Islamic bank and I tell my friends that, too. We are more comfortable like this.”

    You May Like

    US Watching as North Korea Opens Biggest Political Meeting in Decades

    As Workers' Party Congress opens, Washington anticipating possibility of another missile launch or nuclear test as top officials gather

    Video Pop Icon Prince Quietly Helped Afghan Orphans for Years

    He sent thousands of dollars to help an aid group rebuild a training center for orphan boy and girl scouts in Kabul, but kept his involvement secret

    Britain’s Muslims See London Mayor Race as Victory

    Mere running of 45-year-old former government minister and son of Pakistani immigrants Sadiq Khan seen by many as turning point

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Matthew from: Michigan
    June 29, 2012 4:59 PM
    Although well intentioned, I doubt that anyone posting here is actually qualified to discuss the rather detailed jurisprudential issues pertinent to Islamic finance. Unless you have advanced degrees in the subject and are fluent in classical Arabic you are out of your league. Why not just leave it to the people that actually know about these matters?

    by: anon from: Chicago
    June 27, 2012 10:04 AM
    The comments that have been posted here indicate a misunderstanding of what interest is. Islam permits profit with shared risk, but it forbids usury. In one of the models permitted under sharia law, the lender shares in the appreciation or depreciation of the property. In other words, the borrower and lender are partners in the purchase. If the buyer sells prior to paying off the loan, the lender shares in any profit, or loss, based on his ownership share at the time of the sale.

    Think about this - how many people have lost their homes due to foreclosure in the recent housing crash and how many would have lost their home if they had a sharia compliant loan?

    Also, how many of you know that usury was also forbidden in the Bible? Not that any Christians or Jews are complying, but devout Muslims do follow the commandments and divine laws.

    by: RockyBullWkl from: everywhere
    June 26, 2012 5:22 AM
    Oh, I see. Lets not call it interest, just call it a markup. Islam is so just and righteous.
    In Response

    by: Victor from: Omaha
    June 26, 2012 6:05 PM
    The difference is that you actually own the share of the home you are purchasing. It's like a business. For example, if you were to buy a home with a partner, you would take a percentage of the rent from a tenant according the percentage of the home you own. With shariah based financing, you are part owner and renter and percentage of rent you pay is used to buy more shares.

    In the event you can no longer make payments, you will still own the percentage of the home you paid for. If the other owner, Guidance Residential, resells the home because you could no longer make payments, they return a percentage of the profits to you. You can learn more about it here: http://guidanceresidential.com/learning-center/our-videos

    This is in fact more fair than traditional mortgage financiers, who would foreclose your home even if you were one payment away from ownership. Imagine, after thirty years of payments, you hit hard times, and the bank takes your home without ever compensating you for the money you put in.

    by: Anonymous
    June 26, 2012 1:08 AM
    The article points an interesting point. Quote: "The buyers never feel they are paying interest on money." Key word is "feel."
    There is still "interest" being paid. No matter how you try and slice and dice it, the "borrower" is still paying a fee. You can use euphemisms if it makes you "feel" better, but at the end of the day, you are only changing the transaction in an 'emotional' way as it makes you feel better, while the essence remains the same. This is simply because the company assisting the buyer must still make a profit to even exist. Therefore, they need to charge more than what they paid for it. Capitalism trumps everything else in a free market society. And at the forefront of this model is profit, where both the "seller" and the "buyer" have something to gain. You get your house, they make a profit. And to make a profit, someone has to pay more than the other person. Call it what you want. Call it a 'surcharge' if it makes you feel better, but it's still a form of interest.
    In Response

    by: Victor from: Omaha
    June 26, 2012 6:07 PM
    The difference is you actually own a share of the home, unlike a traditional mortgage where, you don't truly own the home, until your mortgage is paid in full.

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    Donations Rescue Afghan Parents, Children From Forced Labori
    X
    May 05, 2016 6:44 PM
    A Facebook campaign organized by a VOA radio host raised 150,000 Afghan rupees to rescue a family from forced labor at a brick kiln in Nangarhar province – the result of the father’s unpaid debt. Video by a VOA reporter in Jalalabad went viral this week and triggered the Facebook campaign.
    Video

    Video Donations Rescue Afghan Parents, Children From Forced Labor

    A Facebook campaign organized by a VOA radio host raised 150,000 Afghan rupees to rescue a family from forced labor at a brick kiln in Nangarhar province – the result of the father’s unpaid debt. Video by a VOA reporter in Jalalabad went viral this week and triggered the Facebook campaign.
    Video

    Video Kurdish Troops Recount Firefight Which Killed US Navy SEAL

    A U.S. Navy SEAL killed Tuesday, when Islamic State fighters punched through Kurdish lines in northern Iraq, was part of a quick reaction force sent to extract other U.S. troops trapped by the surprise offensive. VOA's Kawa Omar spoke with Kurdish troops in the town of Telskuf -- the scene of what U.S. officials called a "dynamic firefight."
    Video

    Video British Lawmakers Warn EU Exit Talks Could Last A Decade

    Leaving the European Union would mean difficult negotiations that could take years to complete, according to a bipartisan group of British lawmakers. While the group did not recommend a vote either way, the lawmakers noted trade deals between the EU and non-EU states take between four and nine years on average. Henry Ridgwell reports on the mounting debate over whether Britain should stay or exit the EU as the June vote approaches.
    Video

    Video NASA Astronauts Train for Commercial Space Flights

    Since the last Shuttle flight in 2011, the United States has been relying on Russian rockets to launch fresh crews to the International Space Station. But that may change in the next few years. NASA and several private space companies are developing advanced capsules capable of taking humans into low orbit and beyond. As VOA's George Putic reports, astronauts are already training for commercial spacecraft in flight simulators.
    Video

    Video US Worried Political Chaos in Iraq Will Hurt IS Fight

    The White House is expressing concern about rising political chaos in Iraq and the impact it could have on the fight against the Islamic State. The U.S. says Iraq needs a stable, central government to help push back the group. But some say Baghdad may not have a unified government any time soon. VOA's White House correspondent Mary Alice Salinas reports.
    Video

    Video Press Freedom in Myanmar Fragile, Limited

    As Myanmar begins a new era with a democratically elected government, many issues of the past confront the new leadership. Among them is press freedom in a country where journalists have been routinely harassed or jailed.
    Video

    Video Taliban Threats Force Messi Fan to Leave Afghanistan

    A young Afghan boy, who recently received autographed shirts and a football from his soccer hero Lionel Messi, has fled his country due to safety concerns. He and his family are now taking refuge in neighboring Pakistan. VOA's Ayaz Gul reports from Islamabad.
    Video

    Video Major Rubbish Burning Experiment Captures Destructive Greenhouse Gases

    The world’s first test to capture environmentally harmful carbon dioxide gases from the fumes of burning rubbish took place recently in Oslo, Norway. The successful experiment at the city's main incinerator plant, showcased a method for capturing most of the carbon dioxide. VOA’s Deborah Block has more.
    Video

    Video EU Visa Block Threatens To Derail EU-Turkey Migrant Deal

    Turkish citizens could soon benefit from visa-free travel to Europe as part of the recent deal between the EU and Ankara to stem the flow of refugees. In return, Turkey has pledged to keep the migrants on Turkish soil and crack down on those who are smuggling them. Brussels is set to publish its latest progress report Wednesday — but as Henry Ridgwell reports from London, many EU lawmakers are threatening to veto the deal over human rights concerns.
    Video

    Video Tensions Rising Ahead of South China Sea Ruling

    As the Philippines awaits an international arbitration ruling on a challenge to China's claims to nearly all of the South China Sea, it is already becoming clear that regardless of which way the decision goes, the dispute is intensifying. VOA’s Bill Ide has more from Beijing.
    Video

    Video Painting Captures President Lincoln Assassination Aftermath

    A newly restored painting captures the moments following President Abraham Lincoln’s assassination in 1865. It was recently unveiled at Ford’s Theatre in Washington, where America’s 16th president was shot. It is the only known painting by an eyewitness that captures the horror of that fateful night. VOA’s Julie Taboh tells us more about the painting and what it took to restore it to its original condition.
    Video

    Video Displaced By War, Syrian Artist Finds Inspiration Abroad

    Saudi-born Syrian painter Mohammad Zaza is among the millions who fled their home for an uncertain future after Syria's civil war broke out. Since fleeing Syria, Zaza has lived in Lebanon, Egypt, Jordan and now Turkey where his latest exhibition, “Earth is Blue like an Orange,” opened in Istanbul. He spoke with VOA about how being displaced by the Syrian civil war has affected the country's artists.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.8742
    JPY
    USD
    107.09
    GBP
    USD
    0.6893
    CAD
    USD
    1.2820
    INR
    USD
    66.504

    Rates may not be current.