TOTOWA, N.J.-North Jersey FCU is reaching out to its large Muslim community by becoming one of the first American financial institutions to offer Sharia-compliant financial products.
New Jersey is home to the second-largest percentage of Muslims in the U.S, with more than 700,000 Muslims in Bergen County alone. The credit union said its deposit program is consistent with the principles of Islamic Law (Sharia).
"We were approached by some of the leaders of the [community] mosques; they came to explain how it is really difficult for those who are observant to get mortgages or car loans, because it is a sin to pay interest or make interest," explained VP-Marketing James Giffin.
Over a nine month period the $188-million institution worked with local imams, financial institutions from the Middle East ,and compliance experts to develop products that comply with Sharia law as well as financial regulatory rules.
"It's a real challenge to reach the religious needs and meet our needs in Washington," said Giffin.
The result is a suite of interest-free checking and savings accounts with complimentary debit cards. It is also offering Sharia Mutual Funds through a partnership with New England Financial. North Jersey FCU is also offering Sharia-compliant mortgages and home refinancing products, although Sharia law made those offerings more difficult. Religious law allows only two types of transactions for financing of property or other major assets. Buyers can either choose a "cost plus sale" transaction, where the financial institution buys the property and re-sells it through monthly payments with a fixed profit, or select from several rent-to-own style transactions. The credit union is continuing to work to develop a Sharia-compliant auto loan that also meets regulatory standards.
Members who open an Islamic share account will be eligible to receive a share of the profits from Islamic mortgages in lieu of interest, provided that the proposal is approved by NCUA.
North Jersey is not the first to reach out to Muslim members. Houston-based Pioneer Muslim Credit Union serves an Islamic membership. And earlier this year, Winnepeg, Manitoba-based Assiniboine Credit Union launched an Islamic Mortgage Program that is in accordance with Islamic practices. Approximately 13,000 Muslims live in Winnipeg. Under the Assiniboine CU mortgage program, ACU and the homebuyer enter into what ACU referred to in a released statement as "declining partnership agreement." Under that agreement, both ACU and the member co-own the home and its title. According to ACU, "During this time, the family has exclusive rights to live in the home and in exchange they agree to pay ACU a profit. At the end of the contract the Muslim family is the sole owner of the home." The program requires a 20% downpayment to participate. Assiniboine said it developed the program after consulting with Islamic scholars in Canada and in the U.S.
