Canada looks into ‘halal’ mortgages
Canada’s federal government looks to make home owning more accessible for Muslim communities through ‘halal’ mortgages, according to AFP.
On 18th April, it was reported that Canadian President, Justin Trudeau and his liberal government had already taken part in consultations earlier in March, with financial service providers to find ways of supporting the diverse needs of Canada’s population.
Trudeau’s government said it would release further details for the coming plans by autumn this year.
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The consultations commenced after Canada’s National Post revealed that many Muslims throughout Canada had been renting their accommodation due to the lack of Islamic mortgage options.
Usury – the lending of money at extreme interest rates – is considered to be a sin in Islam, and therefore the profits made through interest rates are unjust.
To conquer the controversy, Islamic banks adopt an equity participation scheme to ensure that they can benefit financially without having to charge interest.
The equity participation system is where an Islamic bank would lend money to a business without charging interest but would receive a share of the business’s profits instead.
Basically, Islamic finance works on the principle that profit and risk sharing is risk-averse.
Although Canada has seen an increase in Islamic Banks in recent years, none of the top banks currently offer mortgage options that cater to Muslim communities.
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While interest-free mortgages sound ideal, an article in The Guardian revealed that Muslims who want ‘sharia-compliant’ loans face paying 3% more than the interest rate of a conventional mortgage.
Gatehouse Bank, a prominent Islamic bank that offers residential finance products, requires a minimum deposit of 25%. Therefore, for a property costing £320,000, the potential buyer would need to put down £80,000.
Last November, Gatehouse Bank launched the UK’s firstSharia-compliant savings account.
AFP/The Guardian
