Wednesday, January 26, 2011

Sharia compliant loans - are they proof that lenders can survive without usury?

Sharia Law Gains Foothold in US—Federal Judge Upholds Government Funding of Islam

Personally, I am not offended by Sharia-compliant loans marketed to the Muslim community. Such a product is no different than Kosher food on supermarket shelves.

I realize that the case cited in the article is a question about Federal dollars (our tax money) put to use for Muslims in a way that would send the left howling if applied to Christians, and that's a fair discussion.

But what really intrigues me is that loans that comply with Islamic law would have to be non-usurious. Islam is still strict about God's prohibition of excessive interest and gimmicks that keep borrowers stuck in debt for the lender's profit.

If AIG can come up with a Sharia-compliant loan, is it evidence that the interest rates charged to the rest of us are unnecessary and gratuitous?

h/t Dakota Voice


Anonymous said...

Such loans are common in the Jewish community. They are refered to as "shtar iska" documents. I formerly worked for a bank that was 50% Jewish-owned. When we lent to the Jewish community, organizations or individuals, this was common.

TLF+ said...

Anonymous - a couple of ignorant but I think important questions on my part:

1) From your experience in the bank business, could the banks get by offering more, for lack of a better term, "moral" rates for everybody, or do the religion-based loans assume that enough other folks will be paying usurious rates to make it work?

2) If, say, a Catholic comes in and says, "My church has long taught that usury is wrong," would a loan be available to suit that person?