SHAFAQNA – With Europe becoming increasingly multicultural, many established institutions are being forced to change their routines to cater to all tastes. A Norwegian bank started to offer its clientele ‘halal loans’ based on Islamic principles.
A website promoting so-called interest-free ‘ethical loans’ for home buyers was recently launched by Norwegian Storebrand bank. By the bank’s own admission, it is testing the idea of interest free loans to specifically appeal to Muslim home buyers, who would not accept a traditional interest-based loan since Islam prohibits charging interest on loans.
“We wanted to find out if there could be another way to enter a housing market amid rising prices. The product could potentially appeal to young people, new graduates or people who cannot accept normal housing loans because of religious concerns,” the bank informed on the website that was set up to promote the idea of “ethical loans.”
Within only a week, around 300 people reportedly contacted the bank to express interest in the loans.
“Storebrand is now currently evaluating the market potential for such a loan and considering what the product might look like. We have also been approached by financial advisers from the UK and Malaysia who volunteered to help us put together this type of loan,” Storebrand communication manager, Bjørn Erik Sættem, told Norwegian news outlet Vårt Land.
While loans based on Islamic principles are interest-free, they are not entirely free. In practice, it could be more expensive than your ordinary mortgage, Sættem explained. For instance, the bank may buy all or part of the property and then rent it out to the customer until both the loan and the rent are paid in full. According to Sættem, such an arrangement also entailed a higher risk for the bank.
At the same time, Sættem admitted that the bank also had received also “a handful” of negative reactions to the bank’s “bowing and scraping,” with some customers reportedly having repudiated their ties with the bank.
Storebrand is one of Norway’s oldest financial services companies, tracing its roots back to the 18th century. Its main activities are related to life insurance and pension savings.
Islamic law prohibits the acceptance of specific interest or fees for loans of money, regardless of whether the payment is fixed or floating, as sinful. As of 2014, sharia-compliant financial institutions represented 1 percent of total world assets.