When it comes to Muslims and their attitudes towards Islamic Mortgages, they could broadly be categorised into four categories.
(𝗔) – Those who are not comfortable with Islamic Mortgages from banks as they or their Shariah Advisors feel that they are too similar to conventional mortgages as the economic substance is the same between them. These individuals choose to avoid bank mortgages altogether and wait for a Shariah Compliant Home Finance product that they are more comfortable with from a Shariah perspective. However at times such a product is unavailable in the market or if it is available, the waiting list is too long. Therefore, these individuals may decide to rent for the rest of their lives and are comfortable with this decision or wait to purchase a house in cash or borrow from family.
(𝗕) – Similar to Category A, those that feel that Islamic Mortgages offered by banks are no different to conventional mortgages and are waiting for a Shariah Compliant Home Finance Product that they are more comfortable with from a Shariah perspective. However, the difference between them and Category A is that individuals in this category obtain a Fatwa from a Shariah Expert allowing them to take out a conventional mortgage based on necessity or need after explaining their particular circumstances to the Shariah Expert. (Note: I do not agree with this opinion).
(𝗖) – Those who take out conventional mortgages without checking with people of knowledge. They should fear Allah when it comes to this matter.
(𝗗) – Those individuals who follow Shariah Scholars who do not allow taking out conventional mortgages in any circumstance or individuals who do not really feel comfortable with taking out an interest based conventional mortgage even if they can get a fatwa from a Shariah Expert allowing them to do. Individuals in this category feel comfortable talking out an Islamic Mortgage relying on the opinion of reputable Shariah Experts that they are permissible. Although some people may potray that it is only a small minority of Shariah Experts who allow such Islamic Mortgages, this is not accurate as there are a significant number of Shariah Experts from various denominations and backgrounds across the Muslim world who are of the opinion that such products are permissible. Some individuals in this category, may prefer a “better” Shariah Compliant Home Finance Product, but there might be none available or the waiting lists are too long, and thus they also opt to follow the opinion of Shariah Experts who have approved Islamic Mortgages.
Quite a large number of individuals would fall into this category. The main impediment for them in Muslim minority countries is that Islamic Mortgages tend to be more expensive than conventional mortgages due to factors such as the small size and higher cost of funds of the Islamic banks operating within the country or a lack of competiton.
Having a reduced cost of funds (through more deposits) or more players in the market is beneficial for the those in this category as the price difference between Islamic and conventional mortgages would go down as is the case in more developed Islamic finance markets, where the price differential is basically non-existent. Furthermore, it is to be expected that the number of individuals in Category B would reduce as in my experience it is less likely for someone to go for a conventional product if the Shariah compliant alternative is similarly priced, even if they are not 100% comfortable with the Shariah compliant product.
In my humble opinion, players operating in this segment can be supported at the same time as supporting those who are trying to launch “better” Shariah Compliant Home Finance Products. The more competition and options available to customers the better.
