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CU creates Sharia-compliant products for Muslim members
TOTOWA, N.J. (7/26/10)--North Jersey FCU said it is the first U.S. credit union to offer mortgages for the underserved Islamic population that are compliant with Islamic Sharia law, which prohibits the payment or acceptance of interest fees for the lending and accepting of money. The mortgage loans are offered through Reston, Va.-based Guidance Residential and are approved by an independent board of Sharia scholars. The loans also comply with the federal truth-in-lending law, but are different from conventional mortgage loans (The [Hackensack, N.J.] Record via June 29). Although sharia-compliant mortgages can be structured in several ways, Guidance Residential uses a method in which the buyer and the lender create a partnership to purchase a house. Over time, the borrower buys out the lender’s share--with the lender obtaining a previously agreed-upon profit, the newspaper said. An estimated 600,000 Islamic residents live in New Jersey’s Bergen, Passaic and Hudson counties. Islamic law, known as Sharia, is the framework of ethical guidance that Muslims follow. It rules over many aspects of life, but has specific principles governing finances, said the New Jersey Credit Union League (The Weekly Exchange July 19). One way the $183 million asset, Totowa, N.J.-based credit union is fulfilling its mission is through establishing an Islamic finance division. The division also offers mutual funds that preclude investments in alcohol, gambling, pork or pornography, James Giffin, North Jersey vice president of sales and marketing, told the paper. “Our job is to serve the underserved,” Giffin told the New Jersey league. “And after nine months of study and research, we found out how to do it.” The credit union is awaiting regulators’ approval of its plans to offer deposit accounts for Islamic members so they could be paid in dividends instead of interest, the paper said. North Jersey FCU has to respond to the National Credit Union Administration’s questions by Sept. 30. Giffin who expects a decision by year-end, told the paper he doesn’t anticipate any problems. “I haven’t had one member call to complain about the program, and it’s been on our website now for some time,” Giffin told the league. “I don’t think we will have any reputational risk within our field of membership. After all, everyone lives here together in the same community.” With information on credit union regulations and Sharia law gathered, and in collaboration with local religious leaders and those of the local Muslim community, the credit union developed products and services that remain Sharia-compliant, the league said. They include mortgages in partnership with Guidance Residential, no-interest checking accounts with a debit card, and mutual funds in partnership with New England Financial. However, Sharia-compliant auto loans are not on the horizon at this time. “The compliance people haven’t figured out how to do car loans,” Giffin told the paper. To read the articles, use the link.
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