Muslim community optimistic about alternative financing plan

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This article was published 21/05/2024 (821 days ago), so information in it may no longer be current.

Manitoba Muslims are welcoming news Ottawa plans to make it easier for them to buy a house in a way that is consistent with their faith.

In delivering the federal government’s budget in April, Finance Minister Chrystia Freeland announced officials would be “exploring new measures to expand access to alternative financing products, like halal mortgages.”

She added the government has been consulting financial services providers and diverse communities, and that an update would come in the fall economic statement.

Sheikh Ismael Mukhtar of the Manitoba Islamic Association said the news is positive.

“It’s a win-win for Muslim families who want to buy a house, and for institutions that want to help them do that,” he said.

Islam doesn’t forbid lending and borrowing, Mukhtar said. But it is against charging interest — or riba — out of concern it will be used to exploit people in need. In ancient times, some people ended up enslaved because of unpaid debts.

What is halal — or permitted — in Islam is a declining partnership arrangement, or “musharaka in Arabic,” to provide people with financial resources to purchase a house.

The arrangement is much like a rent-to-own purchase except with no interest, involves two people buy and co-own a house together, with the one who puts in the most money then selling their portion of the property to the other through an agreed-upon monthly “rental” payment.

Although the model is different from a regular mortgage, the end result is the same, Mukhtar said — a family gets a new home.

“It’s a partnership arrangement, not a lender-and-borrower arrangement,” he said. “That makes it halal.”

Currently, this is the way many Muslims in Manitoba buy their houses, Mukhtar said. The challenge with that route is there are a limited number of people in the Manitoba Muslim community who have the resources to help prospective homebuyers. The only other option is through Assiniboine Credit Union, the lone banking institution in Winnipeg that offers an Islamic mortgage.

“This is why it’s good the government is looking into ways to expand this way of buying homes,” he said. “There need to be more options for Muslims to buy homes in a way that is consistent with their beliefs.”

Mukhtar realizes this exploration could be a good strategy for the governing Liberals. “With an election coming, they want to court the Muslim vote,” he said, noting Muslims make up five per cent of Canada’s population. “I’m sure that’s in the back of their minds.”

The credit union also welcomes the government’s announcement, said marketing director Dean Beleyowski. Any changes that can make it easier for Muslim Canadians to buy homes from “both a faith-based barrier as well as an affordability barrier… has the potential to bring the joy of home ownership to so many more Canadians,” he said.

While Assiniboine was unable to share specifics about how many Muslims are accessing its Islamic mortgage option, he said it is a “niche but steadily growing product line” and that there is interest in it from other credit unions.

One challenge for many Muslims is that Assiniboine requires a 20 per cent down payment to be eligible for an Islamic mortgage, something beyond the means of many first-time homebuyers. The reason for this, Beleyowski said, is because insurance is currently not available for this type of mortgage — something the government might be exploring.

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