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Purists' Reservations
Daoud Hawa, center, talks with Ahmad Ashkar, left, as Daoud Hawa hosts a dinner party to break Ramadan fast with some Muslim friends at his home in Herndon, Va. Daoud Hawa, a real estate agent, used an Islamic loan to buy a townhouse in Fairfax and then a conventional one to buy a single family home in Herndon. Now he's trying to refinance his Herndon house with an Islamic loan.
(Jahi Chikwendiu -- The Washington Post)
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"I looked into Islamic financing a while back when it was just catching on. But, to me, it still seems like they're charging interest but calling it by another name," said Anwar, 30, who is considering a conventional mortgage -- an option some Islamic scholars say is permissible if no viable alternatives exist.
Other scholars, such as one that Desiree Kazimi and her husband consulted in Egypt, say that there's always an alternative: Rent.
That's what Kazimi has been doing since 1991. She and her husband live in a three-bedroom apartment in Annandale with their son, 9. The couple refuses to sign any contract that contains the word "interest," a term that for secular legal purposes appears in the documents for Islamic mortgages in this country.
Instead, she hopes to save enough money to buy a home with cash, even if it means moving out of the Washington area to do so.
"I would love to have a house with a yard and a porch and an area for my son to play basketball and ride his bike," said Kazimi, 36, a convert to Islam. "Maybe the only way to do that is to move to another state where the homes are cheaper."
Purists would be disappointed by Islamic financing at this point, said Mahmoud El-Gamal, chair of Islamic economics, finance and management at Rice University in Houston.
Bankers, lawyers and scholars have devised financing tools that change the structure, but not the underlying economics, of a conventional mortgage, El-Gamal said. Therefore, either both types of financing are permissible or both forbidden, he said. He sees problems because these deals are trying to fit a modern transaction into the framework of medieval contracts.
"They have to come up with a better argument as to why conventional mortgage is forbidden. Once they do, that's going to destroy the alternative they're creating, " said El-Gamal, author of the book "Islamic Finance: Law, Economics and Practice."
Bridging Two Worlds
Yusuf DeLorenzo, one of six Islamic scholars who helped Guidance Financial develop its model, argues that if the models weren't working, demand for them would not be growing and they would not be attracting so much attention and support from U.S. regulators.
"It's not all hocus-pocus," he said.
"A great deal of time, attention and money is spent ensuring that the transaction complies with Islamic law at every step of the way. There's a huge groundswell in favor of this kind of financing and people are putting their money where their beliefs are. The devil really is in the details."
Rehan Dawer, a senior vice president and head of marketing and distribution at Guidance, said he understands consumer trepidation, especially because so many of the faithful seek guidance from Islamic leaders who are pious and trusted but not necessarily well-versed in finance.
