Sharia-compliant finance and mortgages

As a business person or property owner, have you considered Sharia-compliant finance? Sharia-compliant finance is worth thinking about if you’re an Islamic investor, as you may be wondering whether you are receiving ‘Riba’ (interest) on any of your investments. Likewise, if you’re a property investor or simply buying a home, you may want to consider Sharia-compliant mortgages. Such mortgages provide a way for Muslims to purchase assets such as property, whilst still adhering to Sharia-law.

Why is Sharia-compliant finance necessary?

A central tenet of Islamic finance is that money in itself has no intrinsic value—each unit is 100% equal to the value of another unit in the same denomination—so a Muslim can’t benefit from lending or receiving money. As such, unlike most lenders operating in the West, Sharia banks cannot earn interest when lending money.

How are Sharia-compliant mortgages structured?

Sharia-compliant mortgages are therefore structured differently, as otherwise Muslim clients would only be able to purchase assets in cash. For example, the bank may purchase the asset for resale to the client at a price which includes a margin, allowing the customer to pay this back in instalments. For example, if you were purchasing a £1million property, the bank would buy this on your behalf, having pre-agreed a sale price (say, £1.3million) to sell this back to you at, perhaps via monthly instalments.

There are also other structures in place; the bank may rent it to the buyer over a set period, until the cost is paid back in full. If you’d like a thorough consultation of your options, I would be happy to advise you. Islamic mortgages are also expected to comply with other areas of Sharia Law; Sharia banks should not engage in activities such as financing gambling, for example.

Enness is delighted to have a broad and growing client base in the Middle East, which means that we have endeavoured to continue to nurture relationships with lenders who can provide Sharia compliant finance. For example, we have an excellent relationship with a lender who operates according to Islamic principles—and this is increasingly popular not just with our Muslim customers, but clients across faiths seeking ethical banking.

During this holy month of Ramadam, many Muslim’s look at ways of strengthening their relationships; be it with God, their loved ones or those around them. Following Islamic guidelines profoundly often raises the question of ‘Sharia Compliant Finance’ (Islamic finance). If you’re considering Sharia-compliant finance for your properties, I am happy to act as a point of contact and answer any questions that you have.

Of course, Sharia compliant finance isn’t the only option available for Muslim clients—Enness has, in the past, arranged this for a range of clients, simply because it was the best possible fit for the client. Whatever your goals are, I would be pleased to advise you further.

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