Only you can help Sharia law followers obtain loans

When you think of Sharia law the first thing that probably comes to mind is all of the big ticket items which regularly make the news, particularly “honor killings” and the rest of the horror show which follows such practices. But as I’ve recently been learning there’s a lot more to it than just stoning infidels, maiming or killing women and denying an education to girls. Did you know that Sharia law prohibits the charging or paying of interest on loans? It’s apparently true, and it’s something which hinders homeowners and business operators who follow these rules. Out in Seattle, the mayor is all over the problem. (From Biz Journals)

For some Muslims, it can be hard to buy a house, and Mayor Ed Murray plans to do something about it.

On Monday, Murray’s housing committee released its recommendations for ways the city can increase housing in the city. Most ideas were what you’d expect, including increasing the city’s housing levy and implementing new rules and regulations to foster development of market-rate and lower-income housing.

One suggestion would help followers of Sharia law buy houses. That’s virtually impossible now because Sharia law prohibits payment of interest on loans. The 28-member committee recommended the city convene lenders and community leaders to explore options for increasing access to Sharia-compliant loan products.

Really? This is the big problem you’re trying to solve here? Look… I get that we’re all supposed to be working on the American “melting pot” and embracing diversity and all, but there’s got to be a little bit of adjustment required when you decide to add your thread to the American quilt, isn’t there? This is a capitalist society and loans (which require the payment of interest) are part of the formula for many routine requirements in life. But hey… what do I know? It’s a brave new world and I probably don’t fit into it any more.

Still, the Mayor seems determined and says that he’s working to develop new tools for Muslims who are prevented from using conventional mortgage products due to their religious beliefs. Well, that just sounds peachy. But how does one do that? When I started checking into the background on this, it turns out there are ways to structure a business loan and make it work under Sharia law. One example is the story of Ahmed Irfan Khan, owner of a slaughterhouse which specializes in selling halal meat. He obtained a $2M loan to expand his business without “paying interest.” And it’s becoming more and more common. (From USA Today)

Big and small investors are increasingly dipping their toes in the world of Shariah-compliant financing, a sector that has grown to more than $1.6 trillion in assets worldwide over the past three decades. It’s one that analysts see as having the potential for even greater growth as the Muslim population grows in the U.S. and Europe.

Earlier this month, Luxembourg issued a $254 million, five-year Islamic bond, known as sukuk. Meanwhile, Hong Kong last month completed its first sale of Islamic debt raising $1 billion. That came after Britain in June became the first Western nation to issue sukuk, an Arabic word that roughly translates as “certificates.”

In the case of Mr. Khan, his loan wound up being covered by a bond which then was held against the future profits of the slaughterhouse. In that way, the investors fronting the money got their margin on the back end by collecting a percentage of Khan’s profits. But how this is different from paying “interest” in any way other than quibbling over semantics is a mystery to me. The fact is that he was still accepting money which had to be paid back and he would not have been given that investment coin without the promise of giving additional funds in return. Sounds like a dodgy way to honor your religion if you ask me.

But going back to Seattle for a moment, how are they going to structure a home loan in that fashion? Homes don’t generate direct cash like a business does. Would a bond be issued which allowed the investors to own a piece of the home’s value when it’s sold? The article doesn’t say. But even if that’s how they structured the plan, the housing market is pretty sketchy in the best of times these days. There’s little assurance that real estate (particularly in Seattle) is going to increase in value. And even if it does, people often live in homes for a very long time, if not their whole life. When do the bond holders get their money back?

This sounds like a lot of complicated hoops to jump through just to accomodate someone who is following a law which runs directly contrary to the fundamental structure of American society. But – again – I suppose I’m just old fashioned and on the wrong side of history. Happens to me every day lately.