No Interest Loans: Non-Traditional Financing Expands Access in New Markets

Some people are not able to finance the purchase of a home because their religious practices forbid them from paying interest. These include:

  • Orthodox Jews who cannot pay interest to, or take interest from, other Jews
  • Members of the Hmong community originally from Southeast Asia
  • Some Muslim borrowers who cannot pay interest under any circumstances

However, some lenders are finding ways to help them purchase a home without paying interest. This article describes how two financial institutions address the challenge for Muslim homebuyers in ways that could also be used to help other groups.

Managing the Cultural Divide

Stephen Ranzini, president of Michigan-based University Bank, found some Muslim clients didn’t feel that they could use a traditional bank but were still interested in buying a home.

“When somebody comes in and just challenges a core belief that all banking must include interest, it just blew my mind,” he recalls, “and I’m like, wow, this is really interesting. I mean, I need to learn something more about this.”

During the past 15 years, University Bank has made some $850 million worth of loans in 16 states that are acceptable for the Muslim community.

Rest here…