Credit union offers Islamic mortgages

This is interesting:

Wednesday May 5, 2010 - Winnipeg, Manitoba – Assiniboine Credit Union, in partnership with leaders from Winnipeg’s Muslim community has developed the first Islamic Mortgage of its kind in Canada, answering a need that no other financial institution has been able to, according to Winnipeg’s Imam and respected Scholar of Islam, Shaikh Hosni Azzabi.

After four years of research and development, Assiniboine Credit Union launched its ACU Islamic Mortgage today. Approved by a board of Islamic scholars, the special financing arrangement was designed to address Islamic law that says paying interest on money is not acceptable and is considered usury by the Qur’an. While there are a few small Islamic financing institutions in Canada that obtain funding from a third party and make it available to Muslim homeowners, this is the first mainstream financial institution in Canada to offer an Islamic mortgage directly to members, allowing them to have a personal relationship with the financial institution.

“We call this financing arrangement a ‘Declining Partnership Agreement’ and it is based on the Islamic shared ownership concept called ‘musharaka’”, says ACU’s Vice-President of Corporate Social Responsibility, Priscilla Boucher. In the context of musharaka, the Muslim family and ACU will each contribute to the purchase of a home and each has an ownership share in the property. The family enters into a contract with ACU to purchase ACU’s ownership share over an agreed-upon period of time. During this time, the family has exclusive rights to live in the home and in exchange they agree to pay ACU a profit. At the end of the contract the Muslim family is the sole owner of the home.

Despite its name, the credit union told CJOB that this mortgage is available to anyone, which should come as no surprise (ever heard of someone being turned away from a kosher butcher for not being Jewish?) It will be interesting to see how these mortgages compare with conventional ones. ACU does require 20% down, so it's a bit harder to qualify for than many mortgages; still, it's an interesting idea.