On 2 March, we reported here via Jihad Watch that the state of Minnesota was facilitating Shariah Mortgages:
The Associated Press has distributed a fluff piece on this program today:
http://bismarcktribune.com/articles/2009/03/08/news/state/178713.txt
This additional article gives us an opportunity to provide an explanation of how Shariah-Compliant loans work and how they get around the whole issue of interest. This explanation was originally published on 15 April 2008 in a Frontpagemag.com interview of Alex Alexiev by Jamie Glazov:
The most common SCF transaction is called murabaha which is the equivalent of a conventional bank loan to finance a purchase. What makes murabaha ostensibly Islamic is that the bank supposedly purchases the good and takes a degree of risk on while holding it prior to selling it to the customer on repayment terms, including a mark-up (interest) for the service. In practice, both operations happen simultaneously, the client is also asked to purchase insurance and there is zero risk for the bank. In fact, the bank also charges in advance penalties for late payment that are refunded if the loan is paid on time. In everything but name, this is a standard interest loan except that it is invariably more expensive. A similar thing happens with home mortgages where the bank purchases the home and finances it by requiring ‘rental’ payments in a transparent scheme called ‘diminishing musharaka.’
After engaging in semantic acrobatics to deny that what’s involved is interest-based mortgage lending, the bank then turns around and tells its clients to take the interest deduction on their tax return, and the IRS authorities, bless their compassionate hearts, fully oblige them.
