Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
by
Adnan Jumani
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Table of Contents
Chapter 1: Introduction ................................................................................................................. 5
Background:............................................................................................................................5
Focus of this study ..................................................................................................................6
Significance of the study ........................................................................................................7
Research Goal .........................................................................................................................7
Objectives of the Research .....................................................................................................7
Research questions and/or hypothesis ..................................................................................8
Definitions of the terms used .................................................................................................8
Chapter 2: Trade is Allowed and Riba is Prohibited ................................................................. 9
Prohibition of Riba..................................................................................................................9
Interest Based Loans as Riba ............................................................................................... 10
Commercial Financing in Islamic Sharia .............................................................................. 12
Chapter 3: Home Financing in Islamic Sharia .........................................................................15
Iwad: Taking Risks Purifies the Profits ................................................................................ 15
Halal Profit from Islamic Home Finance .............................................................................. 16
Chapter 4: Islamic Home Financing in USA ............................................................................18
Common Islamic Home Finance Types in USA .................................................................... 18
Murabaha as Home Financing:............................................................................................ 18
Ijara Mutahia bittamleek as Home Financing: .................................................................... 20
Musharaka Mutanaqisa as Home Financing: ...................................................................... 20
Chapter 5: Analysis of Current Solutions in USA ....................................................................22
Current Islamic Home Financing Solutions ......................................................................... 22
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Chapter 1: Introduction
"And whatever you lay out as Riba, so that it may increase in the property
of men, it shall not increase with Allah; and whatever you give in charity,
desiring Allah's pleasure-- it is these (persons) that shall get manifold."
(Quran 30:39)
"...they say, "Trade is [just] like interest." But Allah has permitted trade and
has forbidden interest..." (Quran 2:275)
Background:
It is an American dream to buy a home, and part of that dream is to be able
to purchase the home, even if it means financing part of it, since it is not easy to
pay for homes in cash for most people. Since 1960s, immigration from Muslim
countries has become significant, and population of Muslims in United States has
been increasingly steadily. As the Muslims started to settle in USA, and lay down
their roots. They also wanted to purchase homes and own properties, but
migrating to USA has been a mixed blessing for Muslims, because the capitalist
and secular foundation of the American culture does not leave room for religious
ideals. So, when Muslims tried to own a home, they were faced with some hard
choices. Also, there have been a lot of misinformation and conflicting facts about
whether Islam permits Home Finance, and it has become really difficult to know
what is correct.
Although there are several Islamic financing options available in USA,
some are just interest based financing repackaged in Arabic terms, and others
are Islamic Sharia based products that do not comply with Islamic Sharia
completely. Moreover, it is safe to say that there is no solution for home financing
in USA that adheres to Islamic principle in its entirety, which is available for the
country as a whole, and It has become critically important to provide a definite
and clear solution for Muslims in America that can be available in all the states.
This research will focus on the Islamic financing options available in USA for the
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Muslim population, and will try to determine the ideal formula of Islamic principles
and American financing structure, and American customs without compromising
the basic principles of Islamic Sharia.
Furthermore, Muslims in the United States of America, who are practicing
Islam, face a challenge in determining the Islamic way of financing their homes.
Sometimes, they are not sure if it is even possible to commercially finance home
without indulging into Riba, meaning, if Islam allows purchasing home by
partnering with a financier, who expects profit from the transaction. Sometimes
they are confused by criticism of Islamic Financial Institutions of each other, and
criticism from cynics about similarities of Islamic Finance with conventional
financing. Also, the solutions imported from overseas do not seem compatible
with USA rules and regulations, or at least don't fit as it is, and require some
customization. So, in this paper, we will be covering all of the above challenges,
and providing some details that can help a practicing Muslim in USA make the
correct choice.
between USA laws and opinions of leading scholars. Most important part will be
to break down the contract details published by the Islamic financial institutions,
and analyze them in the light of fundamentals of Islamic Sharia.
Research Goal
Primary goal of this research will be to determine the financing structure
suitable for Muslim Americans to finance their homes, and whether it can be
achieved through commercial financing, but there will be several secondary
goals. One of the secondary goals will be to apply Islamic Financing principle
developed in Europe and Asia to United States financial system, and smooth out
any conflicts. Another important sub-goal will be to evaluate legal verdicts of wellknown and respected Islamic Scholars from outside USA to see if they are
appropriate for USA. Also, it will be important to evaluate the existing Islamic
financing products to determine their adherence to Islamic Sharia, and what
changes can be made to bring these products in conformation with Islam.
Help fellow Muslims in USA with the process of purchasing home without
using methods that involve Riba
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claim that Riba that is prohibited in Quran and Sunnah is not the simple interest
on loan that is common in the world economy today, but usurious form of interest
that compounds interest exponentially. For example, Dr. Mohammad Omar
Farooqs paper claims that Abu Bakr Al-Jassas was the first one to suggest the
stipulated excess (interest based loan) being Riba was not considered by the
early generation as Riba(Farooq, 2007). This is a very serious claim, which, if left
unchecked, can potentially permit Interest based loan for the Muslims, and we
should not ignore it. So, before we look at Islamic home financing, we need to
address this issue briefly, without diving too deep into the debate of interest being
same as Riba. Let us look at how Riba was defined during the time of the
Prophet (may peace be upon him), because Islamic Sharia is based on the
understanding of the Quran and Sunnah by the early generations.
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narrator is in doubt whether it was one to two years or two to three years.)
The Prophet said, Whoever pays money in advance for dates (to be
delivered later) should pay it for known specified weight and measure (of
the dates). (Bukhari, 2006, 3:35:441)
Narrated Abdullah:
The Prophet had a golden ring made for himself... The Prophet then
ascended the pulpit, and after glorifying and praising Allah, he said, "I had
it made for me, but now I will never wear it again." He threw it away, and
then the people threw away their rings too. (Bukhari, 2006, 7:72:765)
So, it is clear that financing a business transaction, and delaying the
delivery or payment is allowed in Islam, but what is not allowed is an exchange of
money for money in different value. In other words, the trade usually involve a
commodity exchange with another commodity, or a commodity exchange for
money, and this type of trade was practiced by the Muslims during the lifetime of
the Prophet (may peace be upon him), and he did not prohibit it. So, Ijara
(Renting), Musharaka (Partnership), Mudaraba (Investment) and Murabaha
(Price plus credit cost) are some of the trade contracts that were common, but
these are trade contracts in nature, and not built originally for financing contracts.
However, interest based transactions has become a norm in the world, and
investment of money on interest is considered a type of trade, by the mainstream
secular economy experts, and the international banks expects profit on money
lending. That is why it has become really difficult for Muslims to trade and live
without being pulled into Riba in some forms, and home financing is not an
exception. In order to provide an alternative to interest based financing, Islamic
scholars had to come up with a way to allow financing business, and home
purchases by using existing economic models.
One of the first methods devised was Murabaha financing, where the
Islamic Bank buys the product or invests in the trade on the behalf of the buyer,
and then turn around and resell it to the buyer with deferred payment in the
future. It is allowed, because price can be increased or decreased by the seller,
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according to the supply and demand of the product, and also price can be
different for immediate payment or deferred payment, but the transaction has to
be a sale, and not a loan. Moreover, this type of financing can only be accepted
in Islam, if it follows the basic condition of the sale. Although this has been a
popular type of transaction in Islamic finance, it has a drawback that the sell is
final, and cannot be renegotiated, so there is very little room to modify the
contract down the line if need arises.
Besides Murabaha transactions, other types of transactions like Ijara, and
Musharaka have been also used to finance transactions when buyer doesnt
have funds to buy on their own, and each of these types have their own set of
conditions. Also, Mudaraba (profit sharing or sleeping partnership) is used for
commercial businesses, where there is periodical profits coming in like a store or
restaurant, but has not been used for home financing. In short, commercial
financing is possible and accepted in Islam, if it is based on tangible assets and
profit and loss sharing, and not based on lending money. Of course there are
conditions and rules that govern commercial financing in Islam to keep them
away from becoming interest based financing, and they will be discussed in
details in the rest of the paper.
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the transaction just and fair, and if the Iwad is not present, then one of the party
will take advantage of the other. When this principle is applied to Islamic home
finance, it requires an Iwad must be present in every contract to counter balance
the profit that the Islamic Bank is earning from their investment; otherwise the
profit will be considered Riba. 'Iwad has been explained in details by Saiful Azhar
in one of his papers, and he breaks it down into three components (a) Market
Risk (b) Effort or Value Added (c) Liability" (Rosly, 2001). In home financing,
market risk is the risk of home value dipping below cost price, efforts is in the
maintenance, and the liability is in officially owning the property and taking liability
in case of law suits, or damage. So, one or more of these must be present in an
Islamic home financing contract.
In fact, there are two ways profit can be earned from a home financing
without incurring Riba. First, the Islamic Bank can share the equity of the home,
as it builds over time, and once the client sells the home, if there is any profit, it
will be shared among the Islamic Bank and the client, according to their
ownership share. Of course, this requires the Islamic Bank to wait for a very long
time to earn profit, and there may not be any profit at the end of the contract,
because the home value could have decreased, and the home could be sold in
loss. Islamic Banks like other banks strive to reduce their risk, and prefer early
profits, so this method will not be very attractive to them. Another way for the
Islamic Bank to earn profit is to charge rent from the client for the usufruct, and
this is the most common, and practical way for Islamic Banks to earn profit from
their investment in home financing.
Halal Profit from Islamic Home Finance
If we pay close attention on how the profit is earned in all of the Islamic
home financing transactions in the USA or even around the world, it is from the
rental income that comes from the client, for their use of the property. So, the
basic right of the Islamic Bank, to extract profit in Islamic home finance, comes
from their role of being a land lord of the home, and all precautions must be
taken to have Iwadh (equivalent counter-value) present from the Islamic Bank
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within this role, which, in this case, will be the liability of a landlord to own a
home. Islamic Bank must fulfil the duty of a landlord according to the Urf
(custom) of the locality, and must have liability of the property, so the profit
earned is in good faith.
Furthermore, if we look at all the rules in Islamic Sharia that govern financial
transactions, the main objective seems to be to avoid the extremes of profit and
loss. For example, Maysir (Gambling) is prohibited, since the profits are acquired
with extreme ease. On the other hand, Gharar (Speculation) is prohibited, since
the risk of loss is very high, and it can lead to deceit. Moreover, Islam prohibits
profit or increase on lending money without taking any risk, which forces all
transaction to be based on real commodities, because all real commodities bear
risk. So, profit and loss sharing is the required component for any Islamic
financial transaction, and possibility of loss or liability cannot be eliminated
completely. In fact, maintaining proper balance between profit and loss is the
biggest challenge in the home finance industry in USA at least, if not around the
world.
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because the sale is finalized at the beginning, and no changes can be made to
the contract, even if both parties agree. This is due to the fact that the item is sold
and the buyer takes full ownership of the product, but cannot sell it, until the debt
is paid. Also, the only way a financing can be Murabaha, and not interest based,
is if the Islamic Bank buys the home, take owner ship and possess the home for
a period, before selling it to the buyer. This transfer of ownership to Islamic Bank
in full and official sense is the only way to avoid Riba, so the Islamic Bank must
take that risk (Usmani, 1999).
However, Islamic Banks do not want to hold title, take liability of the home,
and are not even setup to be the owners of the properties, so when they do take
ownership, it increases the cost of the transaction compare to other home
financing contracts. In addition, if the homeowner like to pay off the balance early,
it becomes very complicated, if not impossible, because the house is already
sold and price is settled, and the price cannot be renegotiated, nor the house be
resold to the same party. Similarly, in the case of default, no further charges can
be assessed, as the sale has been finalized, and the balance is a debt, which
cannot be deferred with further increase, as that is Riba. Majority of the scholars
do not allow modifying the Murabaha transaction once it has been executed
(Usmani, An Introduction to Islamic Finance, 1999).
In USA, Devon Bank offers a Murabaha based home financing (Bank,
2015), but there is no legal fatwa from any scholar regarding their products. In
fact, they openly advertise the fact that their products are developed internally by
non-scholar officers (Bank, Religious Approval, 2015). Regardless of the issues
mentioned, Murabaha can be used for short term financing, where implementing
other methods becomes difficult, if the final contract is developed under the
supervision of an Islamic Scholar. In short, Murabaha is not seen as the solution
for Islamic Home Financing, and remains very controversial if used in that
manner. So, we will not be studying it in details as a possible solution for Islamic
Home Financing in USA.
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partner, and the client is the minor partner. Also, Islamic Bank allows the client to
occupy the property and pay rent to the other partner according to the share. This
is completely halal, and it is the most common transaction used for Islamic Home
financing in USA. After Murabaha, and Ijara, it seems like a third option for home
financing, but, in practice, it is exactly the same as Ijara Wa Iqtina'a, because the
profit is earned through rent, and the client can buy back the portion of ownership
share from the Islamic Bank every month. So, the only difference between Ijara
and Musharaka Mutanaqisa models is that Ijara doesn't require a significant
down payment from the client, but Musharaka requires a significant partnership,
and this difference goes away very quickly once the contract is established and
home is purchased.
Guidance Residential offers this type of home financing, and is the industry
leader in USA for home financing. In their contract, the client buys the home with
Guidance, as partners, and Guidance allows the client to occupy home and pay
them rent along with a portion of ownership buy back. Guidance Residential gets
their funding directly from Freddie Mac, a government backed bank, which
provides funding for other conventional banks. So, Guidance Residential has
removed the conventional bank from the equation, and has established a
Mudaraba like contract with Freddie Mac, but details of the contract are not
available publicly, and we can only speculate on the true nature of the contract. It
is difficult to imagine that Freddie Mac will sign up for an investment where they
dont hold an ability to foreclose and recover their investment without sharing loss
with Guidance or the client, which is the required condition of Mudaraba
contracts (Usmani, An Introduction to Islamic Finance, 1999).
In essence, Ijara Wa Iqtina'a and Musharaka Mutanaqisa are the same
transactions, as far as the home financing is concerned. We will be studying
them in details as single solution, and we will be using Guidance Residential as
the primary model.
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knowledge. In fact, a home was refinanced, for the purpose of this research from
Guidance Residential, which allowed access to their closing documents including
the partnership agreement, and the title procedures. Basically, following are the
steps of establishing this financing.
1. A co-ownership agreement is signed between a corporation representing
Guidance Residential, and the client, establishing the client as the sole
responsible for the property, and giving the client exclusive right to occupy.
Also, this agreement is not recorded in the county.
2. A mortgage is signed to secure the interest of Guidance Residential on the
property in case of default, and recorded in the county records.
3. Title is issued in the name of the owner as the full owner of the property,
and recorded in the county records.
4. Once the transaction is complete, the ownership interest and ability to
collect rent is sold to Freddie Mac, or appended to the credit agreement
between Guidance Residential and Freddie Mac.
Ideally, this is the best method for Islamic Home Financing, because the
Guidance Residential takes ownership of 80% - 85% shares of the property, and
it requires the client to own the remaining 15% - 20% shares of the property by
paying the down payment. In addition, this is a partnership, so the client can
modify or refinance this contract, or sell home at any point. However, the issues
come in when Guidance Residential does not take any responsibility of a coowner, or even register their co-owner status with the government records in
county office, and use Freddie Mac as the funding source of the transaction.
Moreover, the official status of this relationship is identical to a conventional loan,
and in the event of foreclosure, it can be argued that the client is nothing but a
borrower, and Guidance Residential has secured debt guaranteed by security
instrument from the client, who is the only registered owner of the property.
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Residential is allowed to put a lien on the house in the event of default (Guidance
Residential, 2014). If they truly co-own the home, then there is no need to lien
the property, but rather evict the client and rent the property to third property, and
then share the profit. This absence of liability, basically, sets up a Mudaraba
relationship between the Islamic Bank and the client, which chips away on the
claim of asset based financing.
No Co-ownership on Title
In USA, clarity in ownership of properties is utmost important, because the
legal system is efficient, easily accessible, has been in place for more than 200
years, and because it is very common to have disputes over property
ownerships. Of course, similar facilities of legal system exist in many countries,
but American system is the focus of the world, due to the economic implications
of the real estate market in USA, more than other countries. In order to meet
these requirements from the legal system, local governments in USA have
developed extensive rules over how a propertys ownership is recorded, and how
it can be transferred, and how this information can be researched during a legal
case. As a national custom, the word Title is used to represent the ownership
interest of a person or a company in a property. Moreover, title comes into
existence by recording official ownership documents like Deeds and the nature
of ownership is defined on the title. For example, if two owners hold a title as
partners, it is automatically assumed that they hold equal interest in that property
(Office, 2015).
In essence, it is a custom and an official expectation to represent the coownership on the Title, so it can be made public, and if anyone has to put a lien
or file a lawsuit against that asset, they are aware of the owners. In Musharaka
Mutanaqisa offered by Guidance Residential, the Title does not mention the coownership, because it will reduce the tax advantage that the client receives from
US Internal Revenue Service, similar to an advantage under a conventional loan.
Guidance has obtained a fatwa on this matter from the Sharia board that the coownership agreement signed is enough to establish the co-ownership, if
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accepted by local law, and the name of the Guidance Residential does not need
to be on Title (Guidance Residential, LLC, 2002). However, this goes against the
local customs, decent business practices, and deceives the public about the true
nature of the ownership of the property. Also, this tax advantage is originally
created for the consumer who pay interest to the Banks, and this is not intended
for the people who pay rent to their partners for living in that house. So, the coownership of the property should be recorded in the official county records, and
the best method would be to create a corporation and issue the title under that
company name, and then the co-ownership agreement will represent the
ownership interest of each property, and the contract will be public, and
acceptable.
In isolation, this fatwa is correct, but in the big picture of this home
financing, this removes another liability from the Islamic Bank, and brings it yet
closer to the conventional loan. So, the Islamic bank provides the fund, doesnt
have any stake in maintenance of the property, and now, doesnt even take the
risk of official ownership of the property. At the end, if an outsider looks at this
home financing, they will have hard time differentiating between it and
conventional loans, and the involvement of the Islamic Bank would seems very
similar to conventional Bank, because conventional banks are renting the money,
so they dont usually care what happens to the property, which makes the
conventional transactions Riba.
owner is another damage to their claim of asset back financing, because the
whole purpose of the asset based financing is to avoid injustice in both direction.
When the bank demand interest from the client without taking any stake in the
property, they are committing injustice, and similarly, when the client enjoys the
complete profit from the property sale, an injustice is being done to the Bank,
because they invested in the property.
Guidance goes around this by allowing the client to buy out the remaining
property ownership first, during a premature sale, but if we look at this point in
detail, it is impossible for the client to buyout the property without having funds
from the seller, who would never give the funds unless the property is sold, so
both transactions have to happen simultaneously. This is very tricky and doubtful
process, to say the least, which leaves a lot of room for speculation about issues
like having two agreements in one, and selling something one doesnt own. Both
of which are not allowed in Islam, so this clause need to be looked at by Islamic
scholar once again, under the customs of USA, if not in general. Since this paper
is not only about protecting the rights of Client from Islamic Bank, but doing the
right thing, it is recommended that this clause be replaced with allowance to
share of the profit between the Islamic Bank and the client, along with other
changes like the Bank taking partial responsibility of maintenance, and the Bank
taking liability. They all have to go together to protect the rights of both parties.
We cannot have it both ways, meaning that we cannot have Islamic finance
and have all the advantages of conventional financing at the same time, because
the conventional financing provides those advantages as compensation for the
injustice it does, and due to its nature of being a purely financial transaction. We
have to look at the big picture, and come up with solutions that start to separate
away from Riba practices, wherever law provides.
It is safe to say that the form of this contract is a partnership, but substance
of it is a disguised financing with doubts on it being asset backed financing,
which is admitted by Guidance in their paper to some extent (Guidance
Residential, LLC, 2004). These small exceptions can come together as a whole,
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and certainly provide ability for the bank to foreclose on the borrower easily by
declaring their interest as purely debt in nature, and putting aside any illusion of
partnership thereof.
or would Guidance satisfy the Freddie Mac and security instrument holders first
by giving everything to them. This decision will determine the true nature of the
Islamic Finance, and its adherence to Islamic Sharia.
We do not have any cases of foreclosure from Guidance to inspect at this
time, but foreclosures has happened elsewhere in the world, and the Islamic
Bank has taken the role of Lender during these foreclosures (Siddiqui, 2014),
and looking at the documents and practices of avoiding official ownership, it is
safe to presume that the case will be same in USA as well.
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hence leaves doubts in the compliance of these products with Islamic Sharia
(Rosly, Sanusi, & Mohd Yasin, 2001).
For example, Islamic scholars have allowed the Islamic Bank to issue Title
under the customer's name, as long as a written contract is done, since a written
contract in Islam represent legal binding document of ownership (Guidance
Residential, LLC, 2002). Also, at the time of the premature sale, the customer is
allowed to sell the property and benefit from the equity in the home, and left to
absorb the loss from price, if it falls below purchase price (Guidance Residential,
LLC, 2004). In theory, these exceptions meets the Islamic Sharia requirements in
isolation, but they do not meet the requirement of profit and loss sharing between
both partners, as a whole, because the Islamic Bank is not liable for expenses as
co-owner, the Islamic Bank doesnt participate in profit/loss sharing, and third
party cannot litigate against the Islamic Bank. This gap of legal recognition of coownership document, and other issues, leaves the risk solely with the customer,
which renders this transaction into conventional financial secured debt, where
profit to the Islamic Bank is basically guaranteed.
Of course, the scholars, who have approved the product, may or may not
be aware of these short falls coming from practical implementation of the
product, but Mufti Taqi Usmani hints at his doubts when he talks about temporary
nature of his fatwas in western countries, and he encourages local scholars to
come up with local solution, and he seems to be aware of the need of
reformation and improvement (Usmani, Looking for New Steps in Islamic
Finance, 2008). So, there is a desperate need of research into Islamic home
Financing to come up with an Islamic contract that conform to the Quran and the
Sunnah and follow the local regulations appropriately. This study seeks to fill this
gap of knowledge, and provide recommendations to reform and to improve
Islamic home financing products in USA.
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Category3:
These companies are providing interest based loans disguised as Islamic
financing, and have not done enough to avoid Riba. Their products are inherently
flawed, and are just variation of conventional loans. Purchasing home through
these companies is not permissible, and Muslims should avoid them at all cost.
Besides ranking the companies, RFC committee also ruled that owning a
home in USA is considered a need, and not a luxury, so depending upon the
severity of the need, purchasing home should be allowed (Assembly of Muslims
Jurists Of America, 2014).
Following are the ranking of the companies currently operating in USA:
1. Ameen Housing (Permissible in all cases) (Category 1)
2. Guidance Residential (Permissible in time of need) (Category 2)
3. Devon Bank (Permissible in time of dire need) (Category 2)
4. University Islamic Financial (Permissible in time of dire need) (Category 2)
5. Ijara Loan (Not Permissible in any case) (Category 3)
6. Lariba (Not Permissible in any case) (Category 3)
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Dubai where an Islamic Bank had to foreclose on the property that they financed
using Islamic financing model.
On June 14, 2014, an Islamic Finance Conference was held in Chicago,
and experts for different fields were present, but Shaikh Mudassir Siddiqui had a
unique story to share with the participants, which he further explained during one
on one interview. Briefly, he served as a Judge in the arbitration court in Dubai
during financial crisis of 2007-2008, and there were many Islamic financing
contracts that fall through due to the inability of the client to make payments. The
court had to decide whether the client is considered a tenant or a borrower,
because as a tenant their responsibility to pay back the remaining balance are
limited, and the property is essentially owned by the Islamic Bank. On the other
hand, if they are the borrower, then they are still responsible for the balance
personally.
So, what the judges came to know was that the Islamic Bank was not on
the title, and the ownership was not recorded in the official government records.
In these cases, the Islamic Bank's lawyer argued to the Court that the transaction
that was recorded in the official records should be considered a secure debt on
the basis of what was recorded, and the Islamic aspect of the transaction should
be ignored, and the Islamic Bank should not be considered as an owner of the
property, rather a financial institution with a note from the client, secured by the
mortgage on the property. So, after a lot of deliberation and thorough review of
the contract and document, the Court had to rule in the favor of the Islamic Bank
because the substance of the financing was still interest based loan, and the
Islamic contract was not officially recognized as proving the ownership of the
Islamic Bank. Transaction was determined to be secured debt, and all the
obligation of borrowers were imposed on the client (Siddiqui, 2014).
This example from real world clearly supports the argument that if the
Islamic Bank structures the transaction in a way that it is indistinguishable from
the conventional loan transaction on official records, then it does not pass the
test of Iwadh, and hence should not be considered as Riba free. If there is a
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big player in the funding of homes, and has many rules that can be a hindrance
to these solutions, but we should strive to establish Islamic systems of finance
and not continue to use the government agencies and conventional banks as
source.
Mudaraba as a Solution
One solution could be to use Mudaraba (Sleeping Partnership), and the
bank finances the price of the home only, and earns profit from the sale of the
home, when it is sold in the future. Of course it doesnt make a lot of commercial
sense, as the investor usually are not willing to wait 15 to 30 years to earn profit,
but this type of financing need to be explored more, and may be used in the
conjunction with other components to create a viable solution.
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manner is not free from doubts, and could render this portion as Riba, so it
should be avoided.
5. Lastly, Muslims in the USA should not be satisfied with the status quo, and
just get comfortable with the concessions provided by the Islamic scholars
due to their situation; rather they should always be looking for the better
option. Muslims should use their buying power to choose the correct
company, demand changes from those companies, and participate in
researching better solutions.
A Muslim living in USA should understand that these challenges are part of
their lives in non-Muslim lands, and they will be rewarded by Allah for being
steadfast, and striving for the halal and pure provisions. They should not give in
to the desire to easy methods and conveniences afforded by the interest based
loans, because this world is not our objective, but a means to an end, and Riba is
a major sin that draws anger of Allah (subhana wa taala). In fact, they should be
looking for Islamic financing, and demanding from the Islamic Banks to adhere to
Islamic Sharia as decreed by the local scholars, and support the new companies,
who are trying to improve the process. All in all, Muslims in USA are responsible
for providing solutions, establishing, and supporting options for Islamic home
finance, and we should not look for help from UK, Dubai, or other countries.
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