How do I get an Islamic mortgage?

How do I get an Islamic mortgage?

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Islamic law prohibits lariba, usury. Thus, Islamic banks, mainly established in the Middle East and in South and Southeast Asia, offer financing formulas that do not provide for the payment of interest, but are based on profit and loss sharing (mudaraba) and leasing (iyara), but these banks have no presence in Morocco, where real estate loans reached 57 billion dirhams (about 5.2 billion euros) in 2005, 5.6% of the gross income of families.

Karadaoui’s argument is that the non-existence of Islamic banks leaves Moroccans in a situation analogous to that of believers living in non-Muslim countries, who have no choice but to resort to the Sharam (illegitimate) credits for lack of ahalal (legitimate) supply.

With this exclusion of Morocco from the lands of Islam, the famous tele-preacher stepped on more than one callus and earned a very harsh response from the High Council of the Ulema, the highest religious body in the country, presided over by King Mohamed VI. The Rabat hierarchs claim that Karadaoui “overstepped the bounds of decorum” by “arrogating to himself the right to issue a fatwa for Moroccans and proclaim himself their imam”.

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The purchase operations of products with bank credits respecting Islamic finance require that the bank and the client fix the price of the good plus an extra amount that the client will pay in a time that must also be previously established. Said good, will be acquired by the bank that sells it to the client under the agreed conditions. However, the extra amount paid by the customer to the bank will not be subject to the changing market conditions so there is no room for speculation and it cannot be considered as riba (or usury).[1][2] The bank and the customer will pay an extra amount of money to the bank.

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Thus, one of the main concepts that differentiate Islamic finance from the rest is riba. Its origin lies in the introduction of coins with ex-natura sua value or intrinsic value that took their value not from their weight, but from the material they were made of (a precious metal such as gold or silver), instead of the so-called fiat currencies that based their value on their weight or face value. Thus, with fiat currencies, if a debt was agreed upon with a fixed compensation for the one who lent it, it was not considered riba since its value did not vary. However, riba was considered to exist when, when paying a debt, a margin of fluctuation was added to the debt, since the debtor could be faced with a sudden variation of the agreed conditions, suffering unforeseen losses.[1] The riba was considered to exist when a margin of fluctuation was added to the debt.

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Mortgage is permissible according to the Noble Qur’an, the Sunnah (Prophetic tradition) and the consensus of Muslim scholars. Allah, Exalted is He, says: {If they were on a journey and could not find a scribe, they may take something as security…} [Qur’an 2:283].

Allah, Exalted is He, commands Muslims to put debts in writing, when He says: {Believers! If you incur a debt for a stipulated term, put it in writing before a scribe…} [Qur’an 2:282]. And He also says: {If you were on a journey and could not find a notary, you may take something as security…} [Qur’an 2:283].

Thus, Allah, Exalted is He, has made the stipulation of surety a substitute for the contract of debt, which is written after the debt comes into effect and it is obligatory on the indebted person to settle it.

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The guarantee is binding on the debtor, as he owes the creditor, who is not obliged to accept the guarantee and is allowed to cancel the mortgage contract, as only he has the right to claim it. The debtor is allowed to mortgage his share of a property belonging to him and to others, as he is allowed to sell his share to pay the debt.

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The officially called participatory banks in Morocco follow the precepts of the sharia (Islamic law) that prohibits usury or charging an interest rate for lending, investment in businesses illicit by religion such as gambling and alcohol, as well as demands a greater involvement of capital in the real economy, fleeing from speculative transactions.

“The problem of participatory banks is in the continuous increase in demand, because the funds it manages only meet a third of the demand,” Abdeslam Balaji, president of the Moroccan Association of Islamic Finance, explained to Efe.

“We bought the land through the ‘mourabaha’ to avoid usury and have a clear conscience, but opening an account at Assafa is not practical for us. In the Chaabi (Popular Bank) where we have the account open, you find agencies everywhere,” the wife explains to Efe.

To refinance their activities, Morocco’s participatory banks rely mainly on their own funds or on contributions made by traditional banks to Islamic banks through the “wakala bil istitmar” (investment contract) formula, in exchange for profit sharing or through interest-free loans.

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