With thanks to Darrin, Â Elois & Rossco
Whatever it takes to make Australia Islamic:
ONE of Australia’s major banks is planning to introduce “Muslim-friendly” loans that do not charge interest to comply with sharia law.
Instead, the National Australia Bank will structure an Islam-approved line of finance to make money from alternative methods.
These include profit-sharing on the transaction, joint-ventures or leasing-type arrangements.
For example, to get round the Islamic ban on usury – or unfair lending – a Muslim mortgage often works by the bank buying the property, then selling it to the customer at a profit. The customer then repays the sum in instalments.
In this way the profit margin is built in from the start. It also makes the loan immune from future interest rate rises.
NAB said the loans would have to be cleared by a Sharia Advisory Board to ensure they met strict criteria.
“We are dipping our toe in the water and thought we may be able to offer this product in high-density Muslim areas,” said Richard Peters, head of community finance & development at NAB.
“We suspect there is demand out there but we don’t know how big it is, so we will trial a few products first.”
NAB will pump $15m from its not-for-profit finance division into the program, which will distribute funds through various community finance schemes around the country.
Interest-free loans of up to $1000 will be available, which are intended to help finance household items such as washing machines and fridges.
“It’s a small step but we are trying to raise awareness about the need for Islamic finance,” Mr Peters said.
The loans would be available to non-Muslims as well.