Islamic Shariah-compliant mortgages could be available in Canada through one of the major conventional banks as early as this summer, says a Toronto-based financial firm operating within the Muslim community.
“We’re confident by the summer time we will have a solution in place,” said Omar Kalair, chief executive officer of UM Financial Inc.
“We plan to launch with one of the big five banks a whole suite of products under the UM branded name, which will be structured to be Shariah compliant.”
Islamic financing, based on the principle that no interest is charged, is in its infancy in Canada, although widely available in the U.K. At least two U.S. banks currently offer Shariah mortgages.
To get around forbidden interest payments on loans, Shariah-compliant mortgages function by having the lender become an equity partner in a home purchase. The homeowner pays the financial institution putting up the rest of the purchase price monthly “rent” or “profit” payments, and principal.