January 9, 2006, - 3:21 pm

Myths & Facts About the Islamic Bank

By Debbie Schlussel
Over the last month, many friends and readers have sent me links to articles about the University Bank (of Ann Arbor, Michigan) and its new Islamic banking division. Since then, Michael Savage has railed about it on his nationally syndicated radio show. Michelle Malkin and other bloggers have put in on their websites.
I didn’t write anything about it because it’s actually nothing new, but since I keep getting asked about it and about other commentators’ statements about it, I present to you a brief “myths & facts”–setting the record straight about this bank and what should and shouldn’t disturb you about it.
First, you must note the reason for the bank: Muslims are forbidden by shariah (Islamic law) from paying interest on loans.
universitybankmuslimteam.jpg

“New” Islamic Banking Division Engages in Employment Discrimination

MYTH: University Bank of Ann Arbor is part of the University of Michigan and, therefore, subject to church and state separations. (Michael Savage repeatedly made this claim.)
FACT: University Bank is completely a private-sector bank traded on NASDAQ, which services, among others, many students at the University of Michigan. It has no connection to the University of Michigan, so it is not subject to church and state separations.
MYTH: University Bank only allows Muslims to use the Islamic portion of their bank and the shariah-compliant home loans. Michelle Malkin asks (but does not state as fact) whether this is a “Muslim-only bank”. (It is a good question.)
FACT: It had better not be a Muslim-only bank, or it will violate federal banking laws prohibiting discrimination in lending. A great test to determine the answer to Michelle’s question would be for a non-Muslim to try and get one of these shariah-compliant loans. If the non-Muslim is turned down on any sort of discriminatory ground, I know a great lawyer who would love to take on that lawsuit (me).
The bank does appear to discriminate on the basis of religion in other areas, however. Its employees are ALL Muslims. Will they hire non-Muslims in face-to-face lending positions? I doubt it. If a non-Muslim is turned down for such a position, that is a good ground for a lawsuit. Where are the bank’s all-Christian and all-Jewish banking teams? University Bank would be sued big-time if they had these–and the government would shut the bank down.
I’m sure the bank will argue that Muslims won’t trust non-Muslims in this specialized shariah-based lending. Tough. Some Whites and Blacks won’t trust those of the opposing race, but a bank would have a hard time making that argument and defending its hiring choices in a legal forum and/or government EEO investigation.
Detroit’s FOX affiliate showed, in its gushing coverage of the bank, that it has a special prayer room facing Mecca, and allows Muslims to pray five times a day–at work. Do you know of any banks with church or synagogue facilities within, who allow their employees to pray several times during the business day? Will the bank do the same for its non-Muslim employees. Dont’ count on it. But, again, these are grounds for a lawsuit.
MYTH: University Bank’s shariah-compliant bank does not charge interest.
FACT: That’s what they claim, but it’s phony. Islamic law forbids the payment of interest, but the way this Islamic lending system is set up, it’s just a fraud. The bank utilizes a land contract for the Muslim customers to avoid paying interest, and instead, they pay monthly rental payments. The bank is in it to make money. The bank has to charge interest to recoup the investment and make a profit. Therefore, the monthly payments on the mortgage are set up to include interest for the entire period of the payments. They can call it whatever they want, but the customers are still paying interest, regardless of the semantics.
MYTH: University Bank’s Islamic financial services division is new and the first of its kind in the country to comply with shariah. This has been reported in a number of Mainstream Media publications and media outlets, like Business Week, Forbes, the New York Times, etc., etc., etc.
FACT: Banks all over the country have been offering these shariah-compliant, “interest-free” loans, and your tax dollars are subsidizing them. The most prominent is American Finance House–LARIBA, based in Pasadena, CA. Freddie Mac invested millions in LARIBA contracts.

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7 Responses

Is Freddie Mac subject to rules and statutes about investing in entities that unlawfully discriminate? I would think so.

Sue Bob on January 9, 2006 at 5:02 pm

This forbidding of interest is BS. Like everything else in Islam. Muslims make up so many stupid rules, it’s a wonder they can leave their house.

John Sobieski on January 9, 2006 at 6:44 pm

To Sobieski;The muslims don’t have to make up anything it’s in “THE BOOK”.And if you strap a bomb to your kid ,they’ll carry you from your doorstep and send you good clean money.

danny on January 9, 2006 at 9:10 pm

The whole islamic faith is an affront to any civilized society. this sham for some reason is allowed to continue is this country. We need to take back our country from these people. Don’t they have billions of dollars of oil money sitting and accruing interest in a myraid of investment ventures all across this country and around the world. it is time to rid ourselves of these people and that fraud of a religion

John Miles on January 10, 2006 at 10:51 am

Doesn’t look to good.

KOAJaps on January 11, 2006 at 4:47 pm

Will Debbie give us one example of the terms of a 15 or 20-year mortgage loan? It would more persuasive than a million words. Thank you.

John Turnbull on July 21, 2010 at 3:21 pm

Yes it is forbidden to pay or receive interest, but the way it is done is that let us say you are interested in a property, after credit check, the bank will buy the property for you and sell it to you after a markup. Usually that is slightly higher than any regular interest mortgage. But wait, the better part of this is when you buy from the bank the property, you are actually a partner and not just a borrower, so in case you no longer can make any payments in the future, you will not go into foreclosure. Since you are a partner, every time you make your monthly payment, you are actually buying larger portion of interest in the property and your payments will continue until you buy out your partner the bank. But in case you are no longer able to make payments, you and the bank will sell the property and divide the proceeds according to the percentage of the ownership in the property. That is because Islam forbids absolute profit (usury) and since the bank purchased the property under murabaha law (making a profit) they must also accept a loss, but the new owner does not stand to be burdened by the loss alone in case he/she cannot make payments to loss of job, etc. The loss is shared between the two partners. In case there is a resale of teh property, the new owner might even receive back some of his/her

When real estate prices were going up, this was a win-win situation, because property prices continued to increase and everybody was protected, but in this real estate environment the bank has to be very strict on whom it deals with because the losses could be substantial for both parties. As such the bank might be less likely to invest with anybody, yes invest because of the partnership relationship.

This is my understanding of this form of banking.

Kelly on December 26, 2011 at 1:17 pm

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