When Abdallah Sulaiman, a Muslim immigrant, set out to buy his first home in the United States, he was determined to avoid riba – the Islamic term for interest, which is forbidden in Islamic law, or Sharia. After exploring Islamic institutions’ alternative financing options, he felt skeptical.
“It just didn’t feel Islamic,” said Sulaiman, 53, of Tampa Bay, Florida. No matter how the banks framed it, it still felt like “another way to collect interest,” he said. Sulaiman eventually chose a conventional mortgage and paid it off within five years to minimize interest.
Sulaiman isn’t alone in his skepticism. His experience reflects an issue within Muslim American communities: the Islamic guidance against riba is often ignored due to a lack of alternatives or because some banks offering no-interest options are perceived as untrustworthy.
There are an estimated 25-45 Islamic financial institutions in the U.S., up from only a handful in the 1990s. But with about 3.45 million Muslim Americans in the country, that still leaves those who wish to follow Sharia’s moral code with fewer than half the banking options of other Americans per capita.
That can make knowing where to start, or who to trust, more difficult.
Homebuyers usually apply to a bank for a mortgage when purchasing a home, which means they take out a loan for the full cost of the house (principal). They pay the bank both the principal plus a percentage-based interest over the term of the loan, which is usually 15 or 30 years.
While riba-based financing specifics can vary per organization, the general model, called musharaka, or risk-sharing, creates a joint venture between a homeowner and a financing company to purchase a home.
This means that the financier and homeowner both share risks, costs and profit. In order to make this work, the financier first purchases the property at market value and rents it out to the future homeowner, who pays a higher, agreed-upon price in monthly increments until they have paid for the home. This method allows the financier to make a profit while the homeowner participates in a trade, rather than a loan.
“For (homeowners), co-ownership isn’t just a financial choice − it’s a spiritual one. They’re often deeply relieved to find a halal option that aligns with their values,” said Abeer Ali, co-founder and CEO of Neeyah, an Islamic financial institution.
Is this model really halal, or lawful, though?
Personal practices and opinions within Islamic communities vary. Some, like Sulaiman, feel that there is not one “straight answer” to how Islamic banking should function. This lack of black-and-white guidelines within the Islamic community makes him and others feel conflicted about their options regardless of which institution they finance with, he said.
Debate Among Scholars
There are several chapters in the Quran that refer to riba, including one that states, “Allah has permitted trade and forbidden riba.”
Riba “is actually very strictly prohibited in the Quran,” said Abderrahmane Couissi, president of the North American Foundation of Islamic Studies mosque in Apex, North Carolina. “The Quran has been very clear from day one about riba and Muslims should stay away from it and to not get involved in any kind of transaction that involves interest. That’s the answer from the Quran.”
But Couissi notes there is “debate among all Islamic scholars…when it comes to modern issues. There’s a lot of gray area.” For example, he said, scholars take different positions “on certain matters like necessity,” or what would be considered important and necessary enough to pay interest when buying a home or car.
However, when Muslims ask him for advice on riba, Couissi tells them, “If you can stay away from it, that’s the best thing you can do.”
Seeking Other Ways to Finance
Many Muslims resort to alternative financing methods.
Sulaiman remembers from his time growing up in Saudi Arabia that families would buy properties fully in cash, lending each other money without interest and selling land to get extra money instead of a loan in order to avoid riba.
Tasnim Chowdhury, an ethnically Bangladeshi Muslim who is a dental assistant in the Northern Virginia area, highlighted the same practice within her community in the U.S.: “I’ve borrowed money from friends and family, and I’ve never been charged when borrowing from them. (I have also lent money to) friends and family. I’ve never charged them interest, and I would only lend what was within my means,” she said.
However, this option may not be realistic for all, especially for those who do not have stable financial situations or lack the financial support they had in their home country.
Even in the Middle East, many Sharia-compliant Muslims struggle to find truly halal financing options due to Islamic financing institutions labeling themselves as “riba-free” while still participating in forbidden financing practices.
In the U.S., Chowdhury and other Muslims in her life have found it hard to avoid riba altogether. So, they participate in both halal financing when possible and conventional banking otherwise, she said.
Paying interest “is just something that we know we have to do − we don’t really have any choice of going around it,” she said. “Buying a car (without a loan) is a little bit more manageable, whereas a house is not necessarily as manageable, so you have to kind of pay interest.”
Additionally, some Muslims have engaged in conventional banking due to being unaware of Islamic finance institutions when they needed money.
“We would say there are enough Muslims who want to stay away from riba, but most of them find it hard to be 100% riba-free,” said Aftab Butt, a member of the Board of Directors for Crescent Co-Op, an Islamic financial institution. “Mostly, people realize a bit late how serious the issue is and by that time they have accumulated some loans that involve riba, making it hard for them to get out of it.”
Transparency Is Key to Building Trust With the Muslim Community
Ali from Neeyah acknowledges that not all Islamic financing options offer true alternatives.
“We saw that many so-called Islamic mortgage alternatives were just rebranded conventional loans − more focused on fitting into existing frameworks than staying true to Islamic values,” he said. Neeyah’s practice, he argued, is “not a workaround for mortgages, (but) a fundamentally different model designed from the ground up to be halal.”
Neeyah charges no interest and shares in the costs of owning a home. Homeowners can gain principal through flexible payments, the company says.
Aside from debates over whether such institutions offer truly halal financing, there is the issue of access. Not many of these institutions exist, and those that do — in areas with greater Muslim populations such as California, New York and New Jersey — face challenges in publicizing what is unique about their offerings.
While institutions may provide a clear explanation of their riba-free financial model, some individuals remain skeptical of their intentions.
Choosing whether or not to finance with an Islamic institution “all depends on the term and how (their model is) being presented. I’m not saying they’re bad or intentional, but at the end of the day, everyone wants to make a buck,” Sulaiman said.
Zoe Ligairi is a senior at Annandale High School and Asira Abuageel is a freshman at the College of William & Mary. Both are partners of Youthcast Media Group. They worked on the story with former USA TODAY personal finance columnists John Waggoner and Sandy Block, who serve as volunteer YMG editors. Sasha Barnett, a freshman at Annandale High School, contributed to this story.
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