Shariah-compliant mortgage banking, in accordance with Islamic religious law, may soon become a reality in Canada, according to a report published Wednesday by the Canada Mortgage and Housing Corporation (CMHC).
The law firm Gowling, Lafleur Henderson LLP, which prepared the report, said it found no legal obstacle to the practice. It added that “given the growth of Islamic financing internationally, it can be expected that international harmonization of IF accounting and reporting... will occur in due course.”
CMHC prefaced its report by saying that it does not plan to offer the shariah-compliant mortgages, nor does it plan to advocate for a change in current legislation. Ryan Sparrow, Director of Communications for the Canadian Minister of Human Resources and Skills Development, also confirmed to Israel National News, "Canadian Mortgage and Housing Corporation does not and has not (sic) plans to insure Sharia (sic) mortgages."
The report did, however, recommend that private institutions consider providing the Islamic banking option to those Muslim customers who wish to take advantage of such a service.
According to the 88-page report, Canada's Muslim community is beginning to offer shariah-compliant "mortgage-like products" based on the principle that charging interest on loans is forbidden. A similar principle exists in Jewish Law.
In order to make money, shariah-compliant mortgage firms instead become equity partners in the purchase of a home or building, with monthly “rent” or “profit” being paid to the lender along with the principal.
Canada's Muslim community currently numbers approximately 700,000; at least 5,000 of those who were customers at UM Financial bank in Toronto expressed interest in transferring their existing mortgages once a shariah-compliant mortgage becomes available.