American Muslims Grapple With Interest-Based Borrowing 

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• Sue Norton

When Samantha Lord-Konare converted to Islam six years ago, she found herself in a quandary. She had student and credit card loans, but her new religion prohibited riba, the Arabic word for usury. Lord-Konare, who grew up in Hinesburg and now lives in Essex Junction, vowed not to use her credit card unless she was in dire straits. But resolving the issue of her student loan was more challenging.

Lord-Konare consulted Islam Hassan, the imam at the Islamic Society of Vermont in Colchester, who presented her with four options. She could pay off her loan in one lump sum, obtain an interest-free loan, receive the money as a gift, or do her best to pay off her student loan as quickly as she could.

"Of course, I had to choose the last. I could never ask someone for that amount of money," said Lord-Konare, whose tuition loan came to more than $15,000.

Although she's conscientious about not engaging in usurious transactions, Lord-Konare is willing to make one further exception: a home mortgage.

"If I were to buy a house, then eventually my children will get it, and they don't have to worry about having money and interest," she said. Her Senegalese husband, who is also Muslim, was against the idea, but he's warming up to it, she noted.

"We are in America, and although [Islamic law] says we shouldn't have usury, it's also said that you adapt according to the laws of where you are," Lord-Konare said. She would choose a modest home and go with the bank that offered the lowest interest rate, she added. Should financing with a company compliant with Shariah (Islamic law) become available, she would refinance.

Islamic scholars say there is a clear prohibition on usury in the Koran. The Shariah also stipulates that Muslims should acquire wealth in a legal and ethical manner; any element of usury, gambling or chancing is forbidden.

"Getting into debt is a serious decision that a Muslim does not take lightly," wrote Syed Hassan, a Middle East-based Islamic finance specialist, in an email. Loans are only undertaken if they further the function of Shariah to preserve faith, life, lineage, intellect or property, he added.

Giving interest-free loans is considered an act of charity in Islamic culture, Hassan explained, extended to those who are poor and in need of financial assistance. When a Muslim dies, his or her heirs must liquidate the deceased's assets to settle any outstanding debts.

"Although forbidden, it is a reality that usury exists everywhere," wrote Hassan, "[but] we should do our best to avoid it as best we can."

Lord-Konare and her family aren't alone in treading the fine line of observing religious rulings while living in an interest-based global financial order. Of the questions that the Assembly of Muslim Jurists of America receives through its website, approximately 18 percent pertain to financial transactions.

The nonprofit organization has advised on the permissibility of taking out tuition loans, buying car and health insurance, and investing in stocks. It has also assessed home-financing companies that claim to be compliant with Shariah. In the place of interest-based loans, such companies offer cost-plus purchase order, diminishing partnership and rent-to-own options, according to AMJA. But opinion is still divided on whether they truly comply with the Shariah.

To underline the seriousness of understanding Islamic finance, the imam holds weekly evening classes at ISVT. He often gets inquiries from his congregation about home mortgages, he said, and passes on the same advice as AMJA: Renting is the best option.

But, the imam said, taking on a conventional home mortgage is permissible in case of "necessity," as defined by Shariah. This is the category into which AMJA has placed education loans, car and health insurance, he noted. Car insurance is mandatory for Vermont drivers, and it would be too expensive to pay out of pocket for medical care.

"It is not compliant with our religion to get involved in a mortgage system if there is no need for that," the imam said. "But people don't like to rent because they feel like, 'This is not my property.' This is really not true," he added. "You have a contract. It's not like you're living for free. It's your right to use the property."

A more pressing justification, the imam suggested, is needed: "If you're not feeling safe where you are, there is a threat [and] you feel buying a house is the only way for you to feel secure with your family, then in this case you may want to do that."

Even when renting is safe, however, local families may not find it a viable option, said Jan Battaline, a real estate agent in the Burlington area with 34 years of experience. "Rentals are so incredibly tight in this area right now," she noted. "And it has been for as long as I've been in business." Her Muslim clients finance their homes through conventional banks, she said.

Compounding the difficulty of purchasing a home is the elusiveness of Shariah-compliant lenders, which don't offer loans throughout the country and have strict regulations on the types of accommodations they finance. Alicia Kolenovic and her husband discovered that problem when they tried to purchase a co-op in New York City.

"If it wasn't for [Shariah] restrictions, we would have had a home a decade ago," said Kolenovic, who now lives in Vermont, where her husband is a pharmacist. On another occasion, Kolenovic noted, when the couple sought to purchase a condominium, their real estate agent steered them toward working with a conventional bank.

But not owning a home simplified the family's move to Vermont last year — they did it in a week, Kolenovic pointed out. Should they decide to purchase a home in the Green Mountain State, they will opt for Islamic financing. "There's no other way. Otherwise, we would rent for the rest of our lives," Kolenovic said.

Kolenovic does her best to make sure that other aspects of her financial life comply with Shariah. She has an interest-free checking account and carries an iPhone with a shattered screen that would cost her about $300 to replace. If she'd bought phone insurance, she would have been covered, she admitted. She does have car and health insurance, for the reasons the ISVT imam cited.

Kolenovic empathizes with fellow Muslims who choose to take on a home mortgage. "There's no judgment," she said. "We are all equals as human beings. Some people take certain things more seriously than others."

For Muslims seeking higher education, though, getting a loan may seem like the only route to upward mobility. When Noor Bulle received his associate's degree from Johnson State College in 2012, his tuition loan came to more than $10,000. He's the first in his Somali family to receive higher education.

That loan "was not something I wanted to take. It's against my religion, first of all," said Bulle, who now works for the Multicultural Youth Program at Burlington-based Spectrum Youth & Family Services. But he did it anyway, wanting a job with which he could provide better for his family. "What is the reason for going to college?" Bulle asked rhetorically. "To get paid more and live better."

Five years later, Bulle is still paying off his loan. "It's like you're a slave to [the student loan servicing]," he said. When Bulle's younger brother, Omar, transfers to the University of Vermont this fall, he will be debt-free, a recipient of tuition remission. "All he needs to do is study, study, study — that's it," Bulle said.

For Muslims with lower incomes, such as many in Vermont's New American communities, the question of whether to take out loans to finance a home is still a moot point. Omar pointed out that most people in his Somali community don't own homes because they can't afford the loan payments. "I'm sure if they end up buying a house, it will be repossessed," he said.

"I think my dad earns $19,000 a year. You can't buy a house with your income so low," said Omar. "Our parents are incapable of buying a house." But the younger, college-educated generation, he added, will have that opportunity — and the hard choices that come with it.

When Omar bought his first car three years ago, he paid for it with $7,000 in cash — he'd been saving since he was 12 years old. "I used to collect bottles, mow people's lawns; I washed cars," he recalled.

When he starts his junior year at UVM this fall, Omar's only expenses will be his car insurance and cellphone bill. "No loans. That's the way my mum raised me," Omar declared. "Basically, not getting a loan is way better in the long term."