Muslim woman turns to financial institutions for Islam-friendly mortgages

Women are driving the sharia creep in NZ:

A Muslim woman who unsuccessfully lobbied New Zealand’s big banks for interest-free mortgages is turning her attention to other financial institutions.

South Auckland woman Sara Jawadi recently approached banks in an effort to provide Sharia-friendly mortgages to Muslim customers like herself.

Paying or receiving interest on loans is forbidden in Islam, although interpretations vary. Banks around the world offer a variety of Muslim-friendly home finance options, available to both Muslims and non-Muslims, where the customer pays for the home in instalments at a premium rather than taking out a traditional mortgage with interest.

The 29-year-old, who moved to New Zealand from Iraq 11 years ago, said many Kiwi Muslims had to choose between their religion and financial stability.

Jawadi said she had approached Kiwibank, ANZ, BNZ and Westpac but she was either met with no response or was told to send an email.

Westpac and Kiwibank said they did not offer a specific Sharia-friendly product and did not have any plans to do so in the near future.

ANZ spokesman Stefan Herrick said demand for Islamic loans was “very low” and the bank did not offer a specific product catering to the community.

The next step was to approach private investors and finance companies in the hope of a better response, she said.

Alternative home finance models exist around the world and have been used in New Zealand in the past.

“Currently there are no options that cater for Muslims in particular so those who find themselves desperate end up compromising their faith and values and take on the traditional mortgage available in order to achieve the dream of owning a home and providing stability to their families.”

The mother-of-two said Islam was not against buying a product like a house from a bank or financial institution in instalments with an added premium but it was not OK to accept a loan of money and pay interest.

“Interest is usury and it means to some extent the rich will keep getting richer and the poor will be poorer.”

The dental hygienist rents a house, which she lives in with her husband and two children, in the south Auckland suburb of Manukau.

Jawadi said she wanted to buy a home as it seemed a waste to pay rent and have nothing to show for it.

Jawadi and other Kiwi Muslims in similar situations could be in luck as New Zealand’s first Islam-friendly KiwiSaver provider plans to offer interest-free mortgages to Muslims.

Amanah Ethical launched the country’s first Sharia-compliant KiwiSaver earlier this year.

Amanah managing director Brian Henry said the company planned to become a financial institution, which included offering home finance products that did not include paying interest.

Henry said while there were only 43,000 Muslims in New Zealand at the time of the latest census, it was a “dream market”.

New Zealand’s growing migrant Muslim community was highly-educated and in good jobs, he said.

Kiwi Muslims had the means to own their own homes but did not want to go against their faith in order to become homeowners.

“They want to own their own homes, they want to be New Zealanders, they want their quarter-acre paradise, they want to raise their kids.”

However, Amanah’s home finance product was at least a couple of years away.

New Zealand Bankers’ Association boss Kirk Hope said Islamic mortgages were likely to be a niche product, and was not surprised banks had not yet taken an interest.

“It’s just probably not their core business. I think it would need to be a specialist unit that would be either set up by a bank, or a specialist organisation that was to be established.”

How do Sharia-compliant home loans work?

There are different ways for banks and financial institutions to offer home financing to Muslims.

In the UK, Al Rayan Bank, formerly Islamic Bank of Britain, offers products similar to hire purchase or let-to-buy plans.

UK bank Lloyds has a similar product where the bank buys the house for the customer, who then pays the purchase price in monthly instalments.

As the bank is the legal owner of the property, the customer also pays a monthly rent to the bank, which decreases as they buy the bank’s share of the property.

Similar finance products, known as Murabaha, are used in the United States and Canada.

Previous attempts to offer forms of Islamic finance in New Zealand have failed.

Christchurch lender Moorhouse Mortgages tried to get around the Sharia rules by offering a product which used a bond for the purchase of the house, and then a trust to buy the property on the buyer’s behalf.

In 2009, subprime mortgage lender Argosy Property Finance, which brought the country its first Islamic mortgage, stopped making loans after its insurer pulled the plug.

This article has been updated to clarify that Islamic mortgages involve alternative methods of repaying the lender at a premium, rather than traditional interest payments.