Is Islamic Financing Truly Halal?
“You know, Fatima, in the end it’s all the same. Islamic Finance companies just use different terminology.”
Have you been in Fatima’s position? Have you been considering Islamic Financing for your residential
mortgage needs and have been told otherwise? Many of our customers are often faced with this dilemma
and before they can move forward, the question whether islamic financing is truly halal lingers in their mind
and causes confusion.
Riba Free with Shariah Board Approval
Devon Bank has been offering Islamic Financing designed to avoid conventional loans for nearly 20 years.
To answer the question an Islamic Mortgage isn’t a loan, rather an installement sale which is free of interest.
Our documents have been drafted in consultation with local religious authorities. We have received the
Fatwa of the Shariah Supervisory Board of America (Mufti Nawal-ur-Rahman) and other renowned scholars
have examined our financing products and found them acceptable.
Murabaha Product
So what is Devon Bank’s halal islamic financing product? We offer a Murabaha transaction involving a
purchase and deferred payment resale. In this scenario, we buy the home for you and sell it to you with an
agreed-upon profit rate. Often the “profit-rate” is misconstrued as just another word for interest. However,
unlike a conventional loan the house is being sold to you at a fixed price which includes the bank’s profit
which is determined by the purchase price, the amount of down payment, the term of repayment and the
market rate of return on real estate transactions that our investors expect.
The Key Difference
The transaction is structured in Shariah compliant manner, we avoid lending you the money and therefore
there is no interest involved. Rather than lending you the money to purchase the property of your choice
with interest, Devon Bank purchases the property of your choice and sells it to you for a fixed price. At
closing, you do not sign a promissory note that states the principal amount and the rate of interest at which
the principal will be repaid. Instead, you will be signing a Murabaha contract for the balance amount due on
the purchase price of the house.
Are you ready to take the next step with us? Do you have questions? Please don’t hesitate to reach out to
one of our Islamic Financing Specialists. Our knowledgeable experts can guide you every step of the way
and address all your concerns.