In an effort to address housing affordability in Seattle, Mayor Ed Murray has released a proposal which calls for community leaders and lenders to collaborate on exploring different options.
Among the ideas suggested to make housing more affordable for Seattle residents is a segment that will allow Muslims to obtain home loans that are compliant with sharia law.
“For our low- and moderate-income Muslim neighbors who follow Sharia law – which prohibits the payment of interest or fees for loans of money – there are limited options for financing a home,” the proposed plan reads. “Some Muslims are unable to use conventional mortgage products due to religious convictions.”
“The City will convene lenders, housing nonprofits and community leaders to explore the best options for increasing access to Sharia-compliant loan products to help these residents become homeowners in Seattle,” it says.
Under Sharia law, Muslims are prohibited from paying interest on loans. So traditional mortgages are out of reach for people who adhere strictly to Sharia law.
Arsalan Bukhari, Washington state chapter executive director of the Council on American-Islamic Relations, told the Puget Sound Business Journal that he believes that there are approximately two hundred Seattle residents who identify as Muslim that avoid taking out home loans because of their religion.
“They don’t want to pay interest,” he said, adding that many high-wage Muslim earners could easily qualify for home loans.
USA TODAY reported that the world of Shariah-compliant financing has grown to more than $1.6 trillion in assets worldwide over a three-decade period. Countries such as Luxembourg, Hong Kong, and the United Kingdom have embraced some forms of Islamic financing, particularly in the form of Islamic bonds known as sukuk.
"Sukuk act much like traditional bonds, delivering payments to investors until maturity," USA TODAY reported. "To comply with Sharia, the bonds have to be tied to some sort of physical asset. Instead of interest, investors are being rewarded with a share of the profit derived from the asset."
Islamic finance expert Ibrahim Warde of Tufts University told USA TODAY that Sharia-compliant financing has become "a fairly global phenomena."
"Islamic finance in general has benefited from the financial crisis largely because Islamic institutions have done better than the conventional ones," Warde said. "One of the fundamentals of Islamic finance – beyond not just charging interest – is there must be a direct connection in between the financial product and the real economy. That's made it more attractive."
According to Puget Sound Business Journal, Mayor Murray mentioned the proposal at a recent press conference, which will go before the city council for consideration. “We will work to develop new tools for Muslims who are prevented from using conventional mortgage products due to their religious beliefs,” he said.