No interest home LoanNot interested house loan
Interest free financing for US Muslims
By the time the Siddiqui familiy, all of them toddlers and 5-year-olds, had grown out of their present home, they were doing what most Americans do - taking out a loan and buying a new one. But unlike most Americans, Rushdi and Asma Siddiqui will not pay interest on their loan. This is because they are taking full benefit of an Islam house finance scheme started in May this year by HSBC Bank in New York and known by the Arab name morabaha.
This is a sales where no interest is payable. Under such a agreement, the credit institution must own the article at the moment the client purchases it from the credit institution. 2. "In the United States, funding Islam is not necessarily a new phenomena. Multi-national organizations like Citigroup and community-based enterprises like Lariba in California have been providing Islam programmes for years.
"Historically, in Muslim financials, back in the 1980s, programmes were community-based, like Lariba, but they were lacking the most money," says Rushdi Siddiqui, whose part-time position as head of the Muslim group at the Dow Jones Indexes is considered to be his. "There are now larger organizations that have opened Muslim doors. "The HSBC initiatives reflect not only the increasing interest in Muslim goods, but also the Bank's readiness to transfer Islam's funding principles to individual finances.
Indeed, mortgaged loans are only one of three recently established HSBC programs of choice for Islam, according to Tariq Al-Rifai, his US-based banker of state. Its other two activities are interest-free customer loyalty and interest-free current account payments. So as to transform Muslim principals into individual finances, financeers and academics had to recreate West mortgage and card funding in order to bring it into line with Muslim laws.
This Act, or Shari'ah, has two major prohibitions: one against the use of ribaa or ribit, also known as extortion; and the other against unbundling risks such as gaming, insurances, or derivative products from Harar. There is widespread condemnation of the concept of interest by the Moslem community, but the demon is in the detail, says Mahmoud El-Gamal, lecturer in Islam Studies at Rice University in Houston.
"I' m one of the first to acknowledge that the words "Islamic banking" or "Islamic finance" can be quite deceptive given the many resemblances between Islam and traditional financing contracts," says El-Gamal. The scientists are unanimous that interest on credits is explicitly prohibited. However, the notion of interest itself is not prohibited in Islam, because the Shari'ah recognises the current value of currency, says El-Gamal.
"We do not have a refund policy, but with a traditional West loan you have to make a certain payment on a certain date. "There is less chance of using Muslim financing because the creditor cannot include it in a loan agreement. "Thus, the weight of the loan is placed on the shoulder of both sides.
" HSBC's HSBC bankiers were able to produce Shari'ah-compliant loyalty card at the instigation of the bank by substituting the interest rates with a lump-sum $25 interest penalty for arrears not fully settled at the end of the year. HSBC members have worked with a panel of Muslim academics to establish a system to keep the bank account interest-free.
"No interest for the banks. "The size of the HSBC and other Muslim funding program markets really depends on who you talk to, says Rusdhi Siddiqui. But if you talk to worldly Muslims, they don't have much interest in Muslim wares. Even less than every tenth Muslim in the USA uses Muslim service, while more than three fourths have interest-based banks, according to the survey.
" However, in the end, the loan to HSBC in the form of the Morabaha loan contained the traditional methods of a traditional hypothec, which included a rating without charging the purchaser more. "but to say we did it in an Islam way."