As part of an effort to address housing affordability in Seattle, Mayor Ed Murray has been searching for a way to allow followers of Islamic Sharia law to buy housing without violating tenants of their faith.
This idea is one of many that was introduced in a proposal which had called for community leaders and lenders to collaborate on exploring different options.
"For our low- and moderate-income Muslim neighbors who follow Sharia law - which prohibits the payment of interest or fees for loans of money - there are limited options for financing a home," the proposed plan reads. "Some Muslims are unable to use conventional mortgage products due to religious convictions."
Because Sharia law dictates that Muslims are forbidden to pay interest on loans, it becomes impossible for many of them to purchase a home, reported Progressives Today. However, in exchange for letting them do either, the rest of the public would be forced to pick up the debt.
Instead of taking on loans, Sharia-compliant financing would be enacted in the form of Islamic bonds known sukuk.
Sukuk act like traditional bonds, delivering payments to investors until maturity, reported USA Today. However, the bonds have to be tied to a physical asset. Thus, instead of interest, investors are rewarded with a share of the profit derived from the asset.
In exchange for not paying interest, the owner of the housing (or business) merely needs to agree that the money from the investor would be spent on activities that promote social good, while investors and banks pledge to return a portion of the profits to Muslim charity.
Sukuk has been taking the world by storm, being introduced to Luxembourg, China and Britain. In recent years financial giants such as Goldman Sachs and HSBC have worked to introduce sukuk to the United States.
