A growing interest in Islamic banking has ignited a public debate on the concept, with one Muslim group calling on the Canada Mortgage and Housing Corp. Tuesday to abandon its study about the sector.
The secular group Muslim Canadian Congress issued a letter Tuesday criticizing Islamic products as more expensive than mainstream financial ones.
The letter comes as Ottawa is considering its first applications to start up Canadian banks operating within the strictures of Islamic religious law. Sharia-compliant products, such as mortgages and mutual funds, have sprouted up across the country in recent years and are gaining in popularity around the world.
The MCC said the move puts undue pressure on Canadian Muslims to sign on to more costly products.
“Islamic banking is nothing more than an attempt by Islamists, with backing from Middle Eastern financial institutions and their Western partners, to scare Muslim Canadians into believing that they should pay more to the banks and demand less in return, as an act of religiosity,” said MCC president Farzana Hassan in an open letter to CMHC.
It asked the Canadian housing agency to abandon its study into the issue, which will cost about $65,000, and said a better approach would be a banking system that seeks to integrate Canadians.
“What we need is a better deal from the banks for all Canadians, rather than dividing us up into religious groups and pacing obstacles in the way of better integration of all Canadians,” Ms. Hassan said.
“Religion has no place in the banking or mortgage industry.”
CMHC said it merely wants to understand the issue better, and stressed that it has no plans to start offering such products itself.
Proponents of Islamic-compliant products say they simply expand the range of consumers' choices, in line with services being offered throughout the U.K., Asia and the U.S.
“Islamic finance are simply structured trade products devoid of usury, similar to ethical products which have filters,” commented Omar Kalair, chief executive officer of sharia-compliant mortgage firm UM Financial, on an online Globe and Mail forum Friday. “There is no injustice being forced on anyone.”
UM has said its mortgages cost about 0.60 percentage points more than a regular mortgage. Its homeowner mortgages tend to be structured like a rent-to-own system to avoid interest.
In Ottawa, meantime, decision-makers are mulling how to handle a banking trend that's worth hundreds of millions of dollars annually in the Islamic world and may be attractive to Canadian Muslims, known as the fastest growing immigrant population.
Canada's bank regulator, the Office of the Superintendent of Financial Institutions, is studying two proposals for banks that offer services in keeping with Islamic laws that forbid speculation and interest but are in favour of transactions where profit and loss is shared.
The federal Finance department established an Islamic financial services working group in June to study the issue. The 20-person group includes staff from OSFI, Canada Deposit Insurance Corp. and the Bank of Canada.
© The Globe and Mail
