Islamic financing in Canada legal, but still poses hurdles

Islamic financing in Canada legal, but still poses hurdles

Shariah-compliant mortgages and other types of Islamic financing would be legal in Canada, but the CMHC has no plans to insure them or change any legislation or administrative practices to accommodate them, concluded a report.

"Islamic financial products should not present any particular difficulties under Canadian accounting standards," said a study conducted by the CMHC that noted the growing demand for these types of loans.

Based on a principle forbidding the charge of interest on loans, a Shariah-compliant mortgage would position the lender and the purchaser together as equity partners in a home. A monthly rent is paid with principal to the lender that is "putting up the rest of the purchase price," explained a report from the Canadian Press.

This type of arrangement creates some obstacle for lenders, concluded the CMHC report, suggesting that private entities are free to pursue this type of financing for the approximately 700,000 Canadian Muslims that could be interested.

 

38 Comments
  • Erma 2010-01-28 6:24:33 AM
    for the record I want you to know that I am in no way prejudice about anyone. I do however find it sad to think that people who decide to immigrate here want the rules changed to suit them. If I choose to move to another country I expect to go along with that particular cultures beliefs and systems. If I do not then shame on me. There are always choices in life, you may not necessarily like them, but they are there.
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  • Afzaal Qureshi 2010-01-28 6:38:01 AM
    This type of Mortgage should not be allowed in Canada,reason being is that private brokers who are doing it ripping off the innocent Canadian Muslims in the name of Halal Mortgage or Shariah Compliance Mortgage. To begin with they charge heavy fees to arrange the Mortgage from one of the Credit Unions of Canada on paying interest and changing the name to profit sharing with the buyer ,after that they charge monthly rent as being the co-owner of the property. if somebody wants to discharge the Mortgage they have to pay the heavy penalty.It is a rip off in the name of Islam.
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  • Joe Ornato 2010-01-28 6:51:43 AM
    I am not opposed to this type of mortgage. In fact, I had a client who wanted me to work with a lender about 8 years ago, and it is not intended to have "favourable rules". Rather, it is the wording in our contracts in terms of paying interest that conflicts with what the Quaran says. I am not an expert on the Quaran, but what is wrong with amending the way we do mortgages to accommodate an ethnic community? We do this somewhat now for New To Canada residents as well as other niches such as Business Owners. I think all that the Muslim community wants is to restructure the wording of the mortgage documents so that it supports their religious beliefs in how they borrow money. I do not think they are NOT asking for concessions or asking anyone NOT to make money. Having more niches and mortgages that serve the diversity in Canada is another way to ensure lender profitability and respect the ethnic diversity of Canada. The only problem I can see with this is mixing religious beliefs with business, so what are the ramifications under power of sale? Does religion freedom supersede contractual law at that point? This is a good discussion!
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