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Pious Property

Pious Property: Islamic Mortgages in the United States

Copyright Date: 2006
Published by: Russell Sage Foundation
Pages: 144
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  • Book Info
    Pious Property
    Book Description:

    Owning a home has always been central to the American dream. For the more than one million Muslims in the United States, this is no exception. However, the Qur'an forbids the payment of interest, which places conventional home financing out of reach for observant Muslims. To meet the growing Muslim demand for home purchases, a market for home financing that would be halal, or permissible under Islamic law, has emerged. In Pious Property, anthropologist William Maurer profiles the emergence of this new religiously based financial service and explores the ways it reflects the influence of Muslim practices on American economic life and vice versa. Pious Property charts the development of Islamic mortgages in America, starting with Islamic interpretations of the prohibition against riba—literally translated as "increase" but interpreted as "usury" or "interest." Maurer then explores the different practices that have emerged as permissible options for Islamic homebuyers—such as lease-to-own arrangements, profit-loss sharing, and cost-plus contracts—and explains how they have gained acceptance in the Islamic community by relying on payment schemes that avoid standard interest rate payments. Using interviews with Muslim homebuyers and financiers, and in-depth analysis of two companies that provide mortgage alternatives to Muslims, Maurer discovers an interesting paradox: progressive Muslims tend to use financial contracts that seemingly comply better with the prohibition against interest, while traditional Muslims seem more inclined to take on financing very similar to interest-based mortgages. Maurer finds that Muslims make their decisions about using Islamic mortgage alternatives based not only on the views of religious scholars, but also on their conceptions of how business is supposed to be conducted in America. While one form of Islamic financing is seemingly more congruent with the prohibition against riba, the other exhibits more of the qualities of American mortgages—anonymity and standardized forms. The appearance that an Islamic financing instrument is legal and professional leaves many Muslim homebuyers with the impression that it is halal, revealing the influence of American capitalism on Muslim Americans’ understanding of their religious rules. The market for halal financial products exists at the intersection of American and Islamic culture and is emblematic of the way that, for centuries, America's newcomers have adapted to and changed the fabric of American life. In Pious Property, William Maurer explores this rapidly growing economic phenomenon with historical perspective and scholarly insight.

    eISBN: 978-1-61044-384-5
    Subjects: Anthropology, Religion, Business

Table of Contents

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  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. About the Author
    (pp. vii-viii)
  4. Acknowledgments
    (pp. ix-xii)
  5. Glossary of Arabic Terms
    (pp. xiii-xiv)
  6. Introduction
    (pp. 1-13)

    Islamic banking and finance is a growth sector in the world economy. It seeks to create and market financial instruments and investment vehicles that adhere to Islam’s prohibition of interest. There are various estimates of its size and significance. According to one, Islamic finance has grown from around $50 million to over $250 billion and spread to seventy-five countries in only ten years (Janahi 2004). The Dow Jones Islamic Market Index, created in 1999, lists over 1,900 stocks with a market capitalization of over $11 trillion that have been screened to ensure compliance with Islamic law.¹ Many of the largest...

  7. Chapter One What is a Mortgage? The History of a Religious Concept
    (pp. 14-27)

    Mention mortgages and most people’s minds turn to homeownership and interest rates. In the early 2000s many Americans may not have associated mortgages with buying property so much as with generating extra income by refinancing their existing mortgages and cashing out the equity they had built up in their house to use for home improvements or other consumer spending. In 2002 and 2003 combined, Americans filed almost three times as many applications for refinancing loans as for conventional mortgages (see table 1.1).

    The idea that a mortgage can become a source of wealth for the borrower (the mortgagor) in addition...

  8. Chapter Two What is an Islamic Mortgage?
    (pp. 28-43)

    In the aftermath of the attacks of September 11, 2001, Islamic banking came under the scrutiny of the Federal Bureau of Investigation (FBI), the Department of Treasury, and other U.S. government agencies that sought to track and interdict financial transactions that might be linked to global terrorism. The news media quickly generated reports about Islamic charities potentially posing as front organizations for money laundering or terrorist fund-raising, and traditional informal credit associations, like hawala, also suddenly came under suspicion.¹ Where just months earlier the mainstream media had promoted the virtues of Islamic banking in a series of newspaper reports and...

  9. Chapter Three Postmodern and Puritan: A Tale of Two Companies
    (pp. 44-55)

    Most of my quantitative and ethnographic research involved only two of the handful of companies that offer Islamic mortgage replacement products. As noted in the last chapter, many such companies are relatively new to the scene; indeed, most came into existence as I was in the middle of conducting this research. The two companies whose products and practices I examine more fully are well known both in Islamic banking circles and among many American Muslims. I discussed in the introduction my reasons for replacing their real names with pseudonyms in this chapter and the two that follow. Doing so does...

  10. Chapter Four Who Wants Islamic Mortgage Alternatives?
    (pp. 56-73)

    What are the demographic characteristics of people who want an Islamic mortgage? And who chooses which Islamic mortgage alternative? Are more conservative Muslims with strict, literalist interpretations of Islamic law drawn to Ijara’s product, which is based on rent rather than a profit payment that resembles an interest rate? Are more progressive Muslims willing to embrace Searchlight’s less complicated product? The analysis of available quantitative data suggests exactly the opposite.

    In 2002 Home Mortgage Disclosure Act (HMDA) data became available for the first time for Islamic home finance companies. Implemented by Regulation C of the Federal Reserve Board and enacted...

  11. Chapter Five Choosing an Islamic Mortgage Alternative
    (pp. 74-84)

    As the results reported in the previous chapter revealed, non-Muslim Americans’ stereotypes of Muslims are not particularly helpful predictors of Muslim Americans’ decisions and choices. This is true generally, of course. Nevertheless, I was puzzled by the quantitative data on the applicant pools for Islamic mortgages because they did not square with what I had learned from interviewing people involved in the business, including those charged with developing and marketing interest-free mortgage alternatives. If the “puritans” whom Ijara sought to serve were people whose everyday gender politics included patriarchal control over family resources—”traditional family values,” in the current parlance...

  12. Chapter Six The Securitization of Islamic Mortgages
    (pp. 85-92)

    On March 8, 2004, at a conference at the Crowne Plaza Hotel in Dubai, the Guidance Financial Group launched the first American Islamic mortgage-backed security product. The Guidance Fixed Income Fund is a mutual fund that holds securities backed by Guidance’s real estate financing assets. Freddie Mac issues the securities. As a press release reported:

    The press release also reported that Guidance had originated mortgages worth over $200 million and that, in partnership with Freddie Mac, it had developed a “soundly designed distribution process.”

    This chapter reflects on the introduction of Islamic mortgage-backed securities (MBS). The creation of shari’a-compliant security...

  13. Chapter Seven Home Financing and the Transformation of American Islamic Law
    (pp. 93-97)

    Dale Eickelman and Jon Anderson (1999, 12) report that emerging Muslim leaders are “presenting Islamic doctrine and discourse in accessible, vernacular terms” by using “styles of reasoning and forms of argument that draw on wider and less exclusive or erudite bodies of knowledge” (see also Leonard 2003, 20). Karen Leonard (2003) and Khaled Abou El Fadl (1998) note that, in the field of fiqh, the tendency in the United States has been for self-declared experts to make proclamations based on very weak attachments to particular schools or methods of Islamic jurisprudential reasoning. The gate of ijtihad, or individual interpretation of...

  14. Chapter Eight Conclusion
    (pp. 98-102)

    As we have seen, Islamic home financing at first proceeded in fits and starts. Several small local enterprises, cooperatives, and mosque-based organizations attempted various models of interest-free financing, but these efforts never achieved wider regional or national scope. Three events changed all this: the OCC interpretive rulings that declared lease-to-purchase and cost-plus arrangements a simple extension of a bank’s mortgaging powers; the support given to Islamic home financing by Freddie Mac and other government-sponsored enterprises; and the impact of September 11, 2001, on Islamic banking and Muslim American identity. Another seminal event may have been the creation of sukuk—Islamic...

  15. Notes
    (pp. 103-108)
  16. References
    (pp. 109-116)
  17. Index
    (pp. 117-130)