Posted on 01/02/2006 7:56:51 AM PST by quantim
ANN ARBOR, Mich. (AP) — A bank that has been offering special services for Muslims for two years has now formed a subsidiary to focus solely on the religious group.
The Ann Arbor-based University Bank has created University Islamic Financial Corp. to offer Muslims home financing, deposit accounts and Islamic mutual fund shares.
"The formation of the subsidiary allows us to have a financial institution which is 100 percent in compliance with the Muslim Shariah, the legal code of the Islamic religion," bank President and Chairman Stephen Lange Ranzini told The Ann Arbor News for a Saturday story.
Among the laws of Shariah is a ban against paying or receiving interest.
The bank's Islamic deposit accounts allow Muslims to open accounts where any profits are shared rather than paid as interest.
University Bank also offers a mortgage alternative loan transaction program — or MALT — which replaces a traditional home loan with a redeemable lease.
The bank holds the home in trust, and a home buyer makes monthly payments to that trust. Each rent payment includes a set amount of savings, which builds the buyer's equity in the home. When the savings account equals the home's original purchase price, the buyer owns it.
The mortgages are offered across the state, with 57 families in the Detroit area having such loans, and Ranzini said plans are to offer such mortgages nationwide.
Other banks also are targeting Muslims, said Tracey Mills, a spokeswoman for the American Bankers Association trade group.
"There have been other banks that have formed relationships with the Islamic community, developing lending products that aren't in violation with Islamic law," she said.
The Institute of Islamic Banking & Insurance, an independent Islamic finance academic and research group in London, shows that more than 250 Islamic banks around the world manage more than $200 billion.
Ranzini said University Islamic Financial Corp. will allow the University Bank to expand its capital base. He expects the bank, a subsidiary of the Ann Arbor-based University Bancorp financial holding company, will double its assets, which were listed at $56.5 million on Sept. 30.
He said the corporation was formed with $15.5 million raised through the sale of 40,000 shares of private stock.
The bank owns 80 percent of the corporation while the remaining 20 percent is held by Virtue Investors LLC, a group of private investors from Grand Rapids, Ranzini said.
Specifically it offers Murabaha mortgage loans, which are Shariah compliant.
Basically the interest is just pegged into the transaction as a fake sell price for the house. I found this info on another website:
This isn't totally new to the U.S. market. I first blogged about this stuff in July of 2002.How it works
- You identify the property you wish to buy and agree the purchase price with the seller of the property in the normal way.
- You approach us for assistance and complete an application form (see section ‘do I qualify’).
- If we are able to help, the bank will buy the property, after solicitors confirmed that everything is in order, and immediately sell it to you at a higher price.
- The higher price is calculated depending on the value of the property, the number of years you wish to pay us over and the amount of your first payment (see ‘payment calculator’ for an indication of the higher price).
- When purchased, the property is registered in your name and the sale between yourself and the bank is recorded in the Murabaha Contract.
- Your first payment to the bank is made on the day of completion and is your initial contribution, normally a minimum of 17% of the purchase price.
They probably have penalties for early withdrawal.
Naw, you missed it. I had to read it several times. See post 8.
Hamtramck. It used to be an old Polish town, taken over by muzzies.
I have a sneaking suspicuion that this will come back to bite this bank in the butt.
Somewhere down the 'pike, it will probably be proven that the funds are being used for terrorist cells in the US.
I'd hate to be late on that payment, amputation or stoned to death.
They beat Madison, Wisconsin to the punch!
LOL
The bank is FDIC insured, but I wonder if FDIC is also ensuring the subsidiary? It would be interesting to know what FDIC's policy is on insuring institutions that are formed solely to focus on religious groups and provide them special services.
thats my point
there is no such thing as a free lunch
if there is no interest, then they hit you hard on fees or some other compensatory charge. being a bank its charges.
The Hash Bash;
The Michigan Mile;
God I loved college!!!
but I had to grow up and get a real job... pity.
They also say that they don't pay interest, either, though. So if they can get enough Muslims to deposit money at their bank at no interest, they will have lots of money to loan at no interest. But in reality, the money is likely to be funnelled into loans by the parent bank to non-Muslims who pay interest. To me, it sounds like a gimmick to get Muslims to deposit money at their bank, at no interest.
Interest -- No.
Discount Rate -- Yes.
(Simplified, but mostly accurate.)
strikes me as similar to a ponzi game, this is just another money game
here , who ever thought it up & wherever he is, benefits
there is no such thing as a free lunch
And America sleeps....
Works like this:
Muslim finds a house for sale; price $100K
goes to bank and strikes a deal with or without down payment.
Bank buys house for 100K and leases to Muslim.
Muslim pays bank $1000.00 a month rent of which $278.00 is set in savings for the Muslim.
Muslim pays for 30 years and the house is his.
The bank has recovered its 100K from the savings account, has had the tax write off for the house for 30 years and has a significant proffit from the actual $722 rental it received.
The proposition is on the order of a contract for deed or a very prolonged lease with purchace option.
When the market demands it.
Stories like this make it easy to separate the small-l libertarian free-marketeer Republican like myself from the more nativist and authoritarian strains.
People were paying toward a house. But if they missed a payment the deal was off. The Clintons kept all the payments *AND* owned the house. To be fair to the Ann Arbor bank, I'm not convinced that their Muslim banking program is as unethical as the Clintons' behavior at Whitewater.
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