Growing Muslim presence reshaping financial practices

By G. Jeffrey Macdonald

Religion News Service

BOSTON -- Americans awash in credit cards, car loans and mortgages have

long assumed there's only one option for those who need something now 


can't pay cash: borrow the sum and pay it back -- with interest.

But the world of American finance is changing to deliver more options,

thanks to demand from the growing number of observant Muslims in the

United States and their adherence to Islam's moral code on financial


Islam prohibits usury, or interest. In the United States, as lending 


borrowing are currently practiced, the rule has been an obstacle for

Muslims seeking to buy a house or build a worship space. Often, they 


waited until savings or donations could cover all costs.

But as the Muslim population grows -- by some estimates to around 6

million people -- its need for as much as $1 billion annually has led

foundations, municipalities and for-profit financiers to find news ways 


furnishing capital without charging interest.

In a watershed example from earlier this year, mortgage giant Freddie 


started bankrolling loans through a Muslim-friendly lender in Los 


whose acronym, LARIBA, means "no usury" in Arabic.

"They concurred that there is a huge, unmet demand," said LARIBA

President, Mike Maguid Abdelaaty. Since joining with Freddie Mac in

January, he said, LARIBA has dropped its down payment requirements from 


percent to 20 percent and is en route to doubling the number of loans 


writes each month, from 10 to 20. LARIBA does business in the 19 states

where Muslims are most likely to live and it has plans to expand.

With at least six Muslim lenders now competing for customers, Hossam 


of Cambridge, Mass., smells an opportunity to buy the home he's wanted 


his family for five years.

"You used to need to invest for years before you could make the down

payment," Jabri said. "I can tell there are many more options available

now," including offers that will take as little as 15 percent down.

What makes interest-free financing possible is a paradigm in which the

capital supplier shares ownership -- and risk -- with the consumer. 


than lend a chunk of money so the consumer can own a home exclusively, 


instance, the financier buys the portion of the property that the 


can't afford and leases that share to the consumer at going market 


As the lessee makes regular payments, he or she gradually buys out the

financier's share.

In the end, the Muslim consumer usually pays as much as a traditional

interest-bearing loan would have charged. But saving money is not the 


of interest-free purchasing, according to Hanif Crutchfield, a board

member at the Minnesota chapter of the Council on American-Islamic

Relations (CAIR).

"You may not get a better financial deal, but morally speaking from an

Islamic point of view, you're in much better shape," Crutchfield said.

To the question of what's so bad about charging interest?, Muslim 


and clerics have multiple answers. Some say it's a sin for those with

capital to take advantage of the needy by charging an interest fee. 


say interest represents unearned income, and all godly income must be

earned. All seem to agree, however, that those who lend without sharing

the borrower's risk commit a sin, and this is fundamentally why the 


prohibits usury.

Interest payments "may not strike the average American as having 


to do with religion," said Taha Abdul-Basser, Islamic law adviser to 


Harvard Islamic Finance Information Program in Cambridge, Mass. He 


out that the Old Testament, common to Jews, Christians and Muslims, 


prohibits usury (Deuteronomy 23:19), but today followers seldom enforce

the code.

"Muslims still happen to be following that part of their religion,"

Abdul-Basser said.

As Islam grows in the states, it's not just for-profit lenders who are

rethinking business as usual. Institutions of varied stripes are taking

unusual steps to get money into the hands of observant Muslims.

The City of Boston addressed the Islamic challenge this year by selling 


$225,000 parcel at a discount to the Islamic Society of Boston in 


for lectures, counseling and fund-raising assistance at Roxbury 



In Minnesota, Hennepin County -- which includes Minneapolis -- started

offering an Islamic contract for the thousands of African Muslims who 


there and might want to buy tax-delinquent properties on which the 


has foreclosed.

"The county said, `We want to be accessible to all our people. What do 


need to do to make it happen?"' Crutchfield said. The Islamic contract

costs $75, he said, and makes houses available for about the same cost 


interest-based contracts.

Foundations have also stepped forward to provide interest-free loans 


Muslim community centers. The North American Islamic Trust, for 


supplied $300,000 interest-free toward a $1 million facility for the 


Coast Islamic Society in Anaheim, Calif.

And, in yet another type of solution, donors from the Persian Gulf are

buying a rental property in Boston to generate cash for property upkeep 


the proposed $14 million Islamic cultural center. Construction begins 


September even though the community needs to raise another $10 million 


complete the project.

"On community projects, especially schools and mosques, people tend to 


very generous," said Boston project director Yousef Abou-Allaban, 

citing a

dinner that raised $700,000 from local mosque members. Such signs of 


zeal, said Abou-Allaban, make him confident that Boston's 70,000 


can finish construction by 2003 without any loan whatsoever.

As new forms of financing enable Muslims to build mosques, start

businesses and buy homes, this religious minority group is finding 


more enmeshed in mainstream American life. And as its toehold grows

stronger, so also does the hope that Islamic priorities could shape

American culture.

"We aim to strengthen a system that is fairer to people and based on 


values: community is above our individual needs," said Hussam Ayloush,

executive director of CAIR's Southern California chapter. "It's a way 


balance out the selfish trend of greedy capitalism. There must be a 


aspect to the economic system."


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