Monday, September 24, 2007

Muslims get interest free loans from Minneapolis

If you're Muslim, it's against your religion to make or receive interest. It's against Sharia’a. Now, do you think there are no banks in Islamic countries? Of course there are. They use loopholes to ensure money is made without violating Islamic law. Despite that, the city of Minneapolis has a program to spur economic development, part of that plan offers no interest loans to people whose religion prohibits them from traditional loans. Economic development is important, and small business loans can get struggling businesses off of the ground, but should someone's religion play a part in whether that loan is interest free or not?

From the latest mayoral update:

Growing an Economy That Works for Everyone
Mayor Rybak also promoted Minneapolis’ strong, growing economy and pledged more than $11 million in workforce development and economic development strategies in 2008, including:

* $1.5 million for job training and placement programs that successfully placed 14,000 hard to employ city residents into unsubsidized private sector jobs last year
* $4.7 million dollars of small business financing tools, including innovative loans with no interest to business owners whose religious beliefs restrict them from receiving traditional interest-based financing
* $2.1 million for the Great Streets Neighborhood Business District program that focuses economic development on key commercial corridors like West Broadway and Franklin Avenues
* $16 million to improve housing options and strengthen Minneapolis housing market, including $6 million to continue implementing the City’s strategy to address the foreclosure crisis


Cat's Staff said...

I wouldn't mind an interest free non-religion restricts me from receiving traditional interest-based financing...

Ben D said...

As far as I understand, you just pay the interest up front in a single profit payment, and the loan is available to anyone who wants it, regardless of religion. I don't think it's actually any different to a normal loan, it's just a trick to stay within the letter of Sharia law without actually losing banks money.

Chris Schommer said...

I think you probably could get one of those loans if you really wanted. But is it a good deal? I some how doubt it or else you might see more of it.

I read a bit about some of the "no-interest" structures. It's an interesting system. Wana buy a $5000 car? You go to a bank and ask them to buy it for you. They then sell it back to you for $6000 and you pay them in installments. Once you paid them back, it is yours. If you don't pay them back, they get to keep it because it is theirs in the first place. No late penalties though - not sure how that works.

Bjorn Watland said...

Sure, that is how they would do it at an Islamic bank, but who knows how Minneapolis is doing it.

Bjorn Watland said...

This is from Bob Lind with Minneapolis:

Who is eligible for the Alternative Financing program?

In the event program funds are not sufficient to meet all eligible applications, priority will be given to businesses unable to expand without the Alternative Financing, and to businesses 1) located in target areas of Minneapolis; 2) benefiting low- to moderate-income persons by creating jobs or improving services; 3) rehabbing or reusing a vacant structure; and 4) whose owner has a personal net worth less than $1 million. The Alternative Financing Program is available to Muslims and non-Muslims alike.

All eligible applicants must:

* Repay the funds and be an acceptable credit risk (determined by the lender).
* Comply with the Minneapolis zoning ordinances.
* Make efforts to hire Minneapolis residents by working with the City’s Workforce Coordinator.
* Use contractors licensed in Minneapolis.
* Proceeds cannot be used for billboard advertising.

There's nothing specific about limiting the application to only members of a religious group, or how the system avoids the payment or receiving of interest. Interest is specifically mentioned in the proposal, at a 2% rate of return on a $50,000 cap on each project.

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G.A.M.E.S. said...

Christians should also be offered interest-free loans because the Bible clearly states to owe no man any debt except love. So as a born-again Christian, how can I get an interest-free loan?

Nasir al-Din said...

@G.A.M.E.S. I don't think there are any "Christian Banks" that offer interest-free loans. I'm sure Muslim banks would let you have a loan. :)

Unknown said...

An interest free loan plans, quite good enough. Will it also be offered to non-muslim borrowers someday? I do hope that it will as loan that are interest free are considered a great deal already.