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When Abdallah Sulaiman, a Muslim immigrant, tried to buy his first home in the United States, he was determined to avoid: Riva – Islamic term for interest prohibited by Islamic law, or sharia. After considering alternative financing options for Islamic organizations, he became skeptical.
“It didn’t feel like Islam,” said Sulaiman, 53, of Tampa Bay, Florida. No matter how the bank planned it, it still felt like “another way to collect interest,” he said. Sulaiman ultimately chose a conventional mortgage and paid it off within five years to minimize interest charges.
Sulaiman is not alone in his skepticism. His experience reflects issues within the Muslim American community. Islamic guidance on riba is often ignored because there are no alternatives or some banks that offer interest-free options are considered unreliable.
It is estimated that there are between 25 and 45 Islamic financial institutions in the United States, compared to just a few in the 1990s. But there are approximately 3.45 million Muslim Americans in this country, and yet those who wish to follow Sharia moral norms have less than half the banking options per capita of other Americans.
This can make it more difficult to know where to start and who to trust.
Home buyers typically apply for a mortgage from a bank when purchasing a home. This means borrowing the entire amount (principal) of the home as a loan. They pay the bank both the principal and interest on a percentage basis over the term of the loan (usually 15 or 30 years).
Although the details of Rivabase funding may vary from organization to organization, the general model is: Musharakahor risk sharing, creates a joint venture between the homeowner and the financing company for the purchase of the home.
This means that both the lender and the homeowner share the risks, costs, and benefits. To make this work, simply put, a lender first purchases a property at market price and rents it out to a prospective homeowner, who then pays a higher agreed price on a monthly basis until the home is paid for. This way, the lender can both make a profit while the homeowner is participating in the transaction rather than the loan.
“Shared ownership is not only a financial choice[for homeowners]but also a spiritual choice. They are often deeply relieved to find a halal option that aligns with their values,” said Abeer Ali, co-founder and CEO of Islamic financial institution Niyyah.
Is this model real? halalor is it legal?
Individual customs and opinions within the Islamic community vary. Some, like Sulaiman, feel there is no “simple answer” to how Islamic banks should function. He said the lack of clear-cut guidelines within the Islamic community has left him and others feeling conflicted about their options, regardless of which financial institution to lend money to.
discussion among scholars
There are several chapters in the Qur’an that mention riba, including one that says, “Allah has permitted trade and prohibited riba.”
Abderrahman Kuisi, president of the Islamic Research Foundation of North America Mosque in Apex, North Carolina, said riba is “actually very strictly prohibited in the Quran. The Quran has been very clear about riba from day one, and Muslims should stay away from riba and not engage in any kind of transactions involving interest.” That is the answer from the Quran. ”
However, Kuisi points out that “there is debate among all Islamic scholars regarding contemporary issues. There are many gray areas.” For example, he said, scholars take different positions on “certain issues such as necessity,” or what is considered important and necessary enough to pay interest when buying a house or a car.
But when Muslims ask him for advice about riba, Kuisi says, “If you can get away from riba, that’s the best thing to do.”
Looking for other funding methods
Many Muslims resort to participating in alternative funding methods.
Sulaiman remembers when he was growing up in Saudi Arabia, his family would buy real estate all in cash, lend money to each other without interest, or sell land instead of loans to make extra money to avoid ribbing.
Tasnim Chaudhry, a Bangladeshi Muslim who works as a dental assistant in the Northern Virginia area, emphasized that similar practices occur in communities in the United States. “I’ve borrowed money from friends and family, and I’ve never been charged when I borrowed money. I’ve lent money to friends and family. I’ve never been charged interest, and I only lend within my means.”
However, this option may not be practical for everyone, especially those who are not in a stable financial situation or lack the financial support they received in their home country.
In the Middle East, too, many Sharia-compliant Muslims struggle to find true halal financing options, as Islamic financial institutions label themselves as “riba-free.” haramor prohibited financing activities.
In the United States, Chaudhry and the other Muslims in her life find it difficult to avoid riba completely. Therefore, they participate in both halal finance where possible and traditional banking where not, she said.
Paying interest is “just something you know you have to do, and you don’t really have an option to avoid it,” she said. “Buying a car is a little more manageable (without a loan), but a house is not necessarily so manageable, so you have to pay some interest.”
Additionally, some Muslims engage in haram banking because they are unaware that Islamic financial institutions are an option when they need money.
“I can say that there are enough Muslims who want to distance themselves from Riba, but most of them find it difficult to be 100% Riba-free,” said Aftab Butt, director of Islamic financial institution Crescent Corp. “In most cases, people realize the severity of the problem a little later, and by then the riba-related loans have piled up and it becomes difficult to get out of it.”
Transparency is key to building trust with the Muslim community
Neeyah’s Ali acknowledges that not all Islamic finance options offer true alternatives.
“We have found that many of the so-called Islamic mortgage alternatives are simply rebranded conventional loans, with a focus on fitting into existing frameworks rather than staying true to Islamic values,” he said. He argued that Niyah’s practice is “not a mortgage workaround, but a fundamentally different model designed from the ground up to be halal.”
Neeyah charges no interest and covers the cost of home ownership. Homeowners can get their principal back through flexible payments, the company said.
Apart from the debate about whether such institutions truly offer halal financing, there is the issue of access. There aren’t many of these institutions, and areas with large Muslim populations, such as California, New York, and New Jersey, face difficulties promoting their distinctive features.
Although financial institutions may provide clear explanations about Riverfree’s financial model, some individuals remain skeptical about its intentions.
The choice of whether to fund Islamic institutions “all depends on the terminology and how[the model]is presented. I’m not saying they’re bad or intentional, but at the end of the day, everyone wants to make money,” Sulaiman said.
Zoe Rigaili is a senior at Annandale High School, one of YouthCast Media Group’s journalism class partners. Asira Abuagel is a freshman at the College of William & Mary. The students worked on the article with YMG’s volunteer editors, former USA TODAY personal finance columnists John Wagoner and Sandy Bullock. Sasha Barnett, a freshman at Annandale High School, contributed to this article.
