Australia‘s Resi Mortgage Corporation is trialling a Koran-compliant home finance facility for the Islamic market and its New Zealand offshoot is likely to launch a similar product.
While the Koran’s Shariah law endorses the right to make profits from business, it forbids charging interest in commercial and personal financing arrangements.
Resi managing director Peter James, who is also a director of the New Zealand company, says Australia’s Muslim population is about 300,000 with large communities in Melbourne, Perth and Sydney.
The "Murabaha" facilitation program, which takes its name from one of the guiding principles of the Islamic faith, means the home buyer pays the full house price plus the total financing cost of the facility and then repays that total capital cost over time.
"We make a profit out of it, we don’t make interest out of it," James says.
While some Muslims in Australia have taken out traditional home loans in the absence of any Koran-compliant alternative, many also don’t own homes because of their wish to keep to their religious beliefs, he says.
Resi’s product is securitised in Australia through wholesaler Resi Mac, an entirely separate company despite the similar name.
It was developed by a New South Wales-based Islamic trading company, Iskan Finance who then selected Resi as distributor. It has been approved by a five-man Shariah Committee which included Sheikh Imam, Taj-El-Din Helaly, the general "Mufti" of Australia.
James says Resi will have to attract another wholesaler to introduce the product to New Zealand because Resi Mac doesn’t operate here and a key question will be whether they regard the market here as sufficiently large.
The New Zealand 2001 census showed a Muslim population of only 23,637. Nevertheless, it is growing rapidly, doubling every five years over the last decade.
