Vittorio Hernandez - AHN News Writer
Washington, D.C. (AHN) - Lending without interest appears to be a recession proof business. The best evidence to support that claim is Guidance Residential, a firm that has provided financing to over 5,000 units since it opened shop in 2002.
While many business across the U.S. suffered declines triggered by the subprime mortgage crisis and credit squeeze, Guidance Financial enjoyed a 7 percent hike on its income for the first quarter of 2008 compared to a year ago.
Another proof is the University Islamic Financial in Michigan, which has expanded to seven other states in 2007 when it registered a four-fold increase in its home financing applications.
Hussam Qutub, spokesman for Guidance, told the Washington Post, "Folks have to be questioning the methods used by conventional mortgage companies over the last three or four years based on what's happening today."
Nabila Zerrarka, an Algerian woman, added conventional loans often has hidden costs and other surprises that homeowners discover only when they start to default on payments.
According to the Sharia, the Islamic law, businesses are banned from profiting from a client's financial difficulty. Late payments are charged only a flat administrative fee to cover processing cost. It does not impose percentage-based penalties and extra fees.
A business model often used by Islamic financing for home is the lease-to-own contract in which rent is equal to current interest payments or lease-to-own terms.
On a large scale, another proof of the success of Sharia financing is the first quarter report of the Dubai Islamic Bank, which logged a 31 percent increase.
The wider acceptance of Islamic financing in the U.S. is another indicator of Muslim integration into the American mainstream society. Rizwan Jaka, president of the All Dulles Area Muslim Society, explained to the Washington Post, "It's part of the whole process of being a part of this country while being able to have our faith accommodated... The American dream is to purchase a house, and the American Muslim dream is to be able to do so in an Islamic manner."
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