Bank in Maine offers interest-free housing to devout Muslims

Bank is seeing growing Muslim population, primarily due to immigrants from various countries such as Somalia, Afghanistan and Iran

AUGUSTA, Maine – Androscoggin Bank in Lewiston, Maine, has come up with a solution that will allow devout Muslims to own homes without paying interest.

The bank’s CEO, Neil Kiely, pointed out that denying homeownership to Maine’s Muslim residents can have a negative impact on their economic participation and a lasting generational impact.

The bank is seeing a growing Muslim population, primarily due to immigrants from various countries such as Somalia, Afghanistan and Iran.

However, Sharia compliance meant that they could not pay interest on loans, which blocked their path to homeownership.

To overcome this challenge, Androscoggin Bank invested over a year in developing a mortgage product that was in line with Islamic principles.

It introduced an arrangement known as “Ijara,” in which the bank buys the property and the customer rents it.

A portion of each payment contributes to the tenant eventually becoming the owner of the property, with full ownership granted only after the loan amount is paid off.

Kiely emphasized that these Sharia-compliant mortgages are economically equivalent to conventional mortgages. 

Similar to Androscoggin’s approach, there are other models for Islamic home financing, such as “musharakah” with joint ownership and “murabaha” with resale and deferred fees.

Despite these innovative solutions, macroeconomic challenges such as low housing supply and high interest rates remain barriers.

Nevertheless, Androscoggin Bank and others are eager to promote homeownership to Maine’s Muslim community, recognizing the potential to support overall community wealth creation and growth.