Islamic Finance

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Adel Iqbal’s home is what many Americans aspire to have. Its 4,700 square feet includes five bedrooms, a library, and deluxe kitchen package with high-end cabinets and appliances.

Iqbal’s favorite part, though, is down a flight of carpeted stairs.

Adel Iqbal bought his 4,700-square foot house in Superior Twp. with an Islamic mortgage.

The finished basement is enormous, with a full kitchen, a pool table, and a big-screen television.

“What we do is when we do a little party, all the male and older kids would be in the basement, and women would be upstairs so they can freely do whatever they want to do, and we can freely do whatever we want to do,” says Iqbal.

Iqbal financed this house through University Islamic Financial, in Ann Arbor, with a loan that complies with Islamic law.

University Bank President Stephen Lange Ranzini says several years ago, a man walked into his bank, and asked to see him.

Ranzini says the man said he was a Muslim, “And I said, well, that’s fine. We have Muslims in our lobby every day, I see them with their long beards and head scarves,” he recalls. “What seems to be the problem? We’re serving the Muslim community.”

The guy told Ranzini: You don’t have the products we need.

That stumped Ranzini, since he figured the bank offered every service a customer could want – deposit products, lending and investment products, stock brokerage, internet banking….

“And he said, ‘But all your products have interest’ And I said ‘yeah, so what? We’re a bank! What could be the problem with that?’

“And he said, ‘But Muslims can’t pay or receive interest.’ And I was like, ‘Well, how do you do banking then?’”

That conversation led Ranzini to research Islam’s views on banking, and he ultimately convinced his board to create University Islamic Financial, and start offering products that comply with Islamic law – or Sharia.

Charging interest is considered usury in Islam, and it’s forbidden.

University Islamic Financial offers two types of mortgage alternatives. One is similar to a lease-to-own. The other is an installment sale. In both cases, fees are paid by the borrower that roughly equal the interest on a traditional mortgage.

Ranzini says it’s kind of like what makes food Kosher for Jews, or Halal for Muslims.

“So if you had a cheeseburger, which was…Halal, and you had a cheeseburger which is…not Halal, they’re going to look the same, they’re probably going to taste the same,” says Ranzini. “But the way they’re made is very different. It’s all about process.”

Ranzini says the Islamic mortgages his bank offers means many of his Muslim customers won’t have to wait decades to save up enough money to pay cash for a house.

For Adel Iqbal, having University Islamic Financial enter the mortgage game meant saving quite a bit of money.

He financed his last house through a bank in California that charged the equivalent of double the interest traditional mortgages were going for at the time.

Iqbal says for observant Muslims like him, a loan is a huge responsibility.

“He cannot enter the heavens until somebody pays off his loan. So a loan is a very serious thing in Islam,” says Iqbal.

That kind of commitment makes defaults a rare thing among University Islamic Financial’s Muslim clients.

Iqbal says Islamic banking is something even non-Muslims might want to look into.

Contact Sarah Hulett at sarahhu@umich.edu