19 Apr. 24
The Canadian government is considering options to expand access to financing alternatives, such as halal mortgages, in line with Prime Minister Justin Trudeau’s efforts to assist Canadians in achieving homeownership, with a specific focus on the Muslim community.
The ‘Halal Mortgage’ represents a significant stride in enabling Muslims in Canada to adhere to their religious principles while purchasing homes. It is structured to align with Islamic law, which prohibits the payment or receipt of interest (riba). Instead of interest, this mortgage functions on a ‘rent-to-own’ basis, where the bank acquires the property and subsequently sells it back to the homeowner at a higher price, paid over installments.
The government, in its Budget 2024 announcement, mentioned exploring changes in tax treatment or establishing a new regulatory framework for financial service providers, ensuring adequate consumer safeguards.
Islamic faith views interest charges as usury and considers profits derived from interest as unjust.
While Islamic financial institutions around the world offer mortgage and lending products that avoid conventional interest payments, none of Canada’s major banks currently provide such services.
Prime Minister Trudeau hailed the initiative, emphasizing Canada’s commitment to diversity and inclusion. He lauded the ‘Halal Mortgage’ program as a testament to fostering an inclusive society with equitable access to opportunities, particularly in the housing market.
The introduction of the ‘Halal Mortgage’ aims to address the challenges faced by many Canadian Muslims who have struggled to reconcile their faith with traditional banking systems. Traditional mortgages often involve interest payments, deemed usurious under Islamic law, deterring many Muslims from pursuing mortgages and limiting their ability to acquire homes and accumulate wealth.
The ‘Halal Mortgage’ program will be administered by the Canada Mortgage and Housing Corporation (CMHC) in collaboration with Islamic financial institutions. CMHC will provide funding to Islamic banks and credit unions to offer ‘Halal Mortgages’ to eligible homebuyers. The program also includes financial literacy and homeownership education to ensure prospective buyers grasp the terms and conditions of Shariah-compliant mortgages.
Apart from the ‘Halal Mortgage’ program, the Canadian government is exploring other avenues to support the financial requirements of its Muslim population. This includes developing Islamic banking and investment products and establishing a national zakat fund to support charitable activities in accordance with Islamic principles.
The announcement of the ‘Halal Mortgage’ program has garnered positive feedback from Muslim community leaders and organizations across Canada. Farhat Rehman, President of the Canadian Islamic Congress, commended the government’s initiative, citing it as a historic milestone for Muslims in Canada. Rehman believes that the ‘Halal Mortgage’ program will not only facilitate homeownership but also empower the community to engage more actively in the Canadian economy.