Pious Property: Islamic Mortgages in the United States

Introduction

INTRODUCTION Islamic banking and finance is a growth sector in the world economy. It seeks to create and market financial instruments and investment vehicles that adhere to Islam’s prohibition of interest. There are various estimates of its size and significance. According to one, Islamic finance has grown from around $50 million to over $250 billion and spread to seventy -five countries in only ten years (Janahi 2004). The Dow Jones Islamic Market Index, created in 1999, lists over 1,900 stocks with a market capitalization of over $11 trillion that have been screened to ensure compliance with Islamic law.1 Many of the largest multinational banks now have “Islamic windows” that offer financial services and products in compliance with Islamic law. Measured in terms of transactions, Citibank is the largest bank offering such “Islamic” services, having managed $6 billion in “shari’a-compliant” funds since 1996 (Pope 2005). The U.S. Department of Treasury appointed its first Islamic banking “scholar-inresidence ” in June 2004. Meanwhile, Muslims the world over hold around $180 billion in bank funds. This represents an untapped market to industry analysts, who expect up to 15 percent growth over the first decade of the twenty-first century (Day and Jayasankaran 2003). Despite the growth and potential of Islamic banking and finance, however , many commentators and critics question the whole endeavor. In a recent book, the economist Timur Kuran (2004) criticizes Islamic banking as an ideological smoke screen disguising anti-Western interests and promoting inefficient economic thinking. It may serve to bolster the Islamic credentials of the elites who support it, but it does little to address the pressing economic needs of Muslims worldwide. Abdullah Saeed (1998, 1999), in documenting the history of Islamic banking, notes the serious tensions between those who seek to create a new economic or social utopia and those who seek to create a profit-generating brand name 1 to tap into an emerging market niche. Many commentators, like Frank Vogel and Samuel Hayes (1998), take a more pragmatic point of view: no matter how it is evaluated, and whatever the intentions of its promoters, Islamic banking exists, and it is attracting intellectual and economic attention . In another work (Maurer 2005), I argue that Islamic banking restages some of the animating problematics of contemporary social theory as well as those of economic exchange more broadly. In doing so, I argue, it also reveals elements of conventional (that is, non-Islamic) finance and helps us better to see the intertwining of social domains we tend to keep separate analytically, such as religion and economics, or moral values and economic value (Stark 2002). My concern in this book is much smaller in scale, and closer to home. In the course of my research on Islamic banking I became fascinated with experiments going on in the United States and elsewhere to provide Islamically acceptable financing for purchasing a home. When I first began research on Islamic banking in 1998, there was only one Islamic mortgage provider in the United States of any significance, although there had been several earlier failed attempts. As of June 2005, there were at least seven, two of which came into being as I was completing this book. All of the growth has taken place since 2002. The number of applications for Islamic mortgages nationally increased sixfold, from 344 to 2,163, between 2002 and 2003.2 Although the growth has been dramatic, the absolute numbers are small. Are Islamic mortgages just a blip on the radar screen of American home finance or global Islamic banking? Or do they mark something more significant? My answer obviously leans toward the latter conclusion, though this answer is not as direct as one might at first suppose. The argument of this book is that Islamic mortgages in the United States provide a window into an ongoing transformation in Muslim Americans’ understanding of Islamic law and that this transformation has been spurred as much by American government and bureaucracy as by shari’a scholarship or traditional religious interpretation. Mortgage lending in the West historically has had a troubled relationship to usury. The common law settled the issue in the 1600s. In Islam , however, the debate over usury has had a different history, one closely related to the question of interpretation (ijtihad) and the finality of Islamic law (shari’a) and jurisprudence (fiqh). Ijtihad opened doors for Islamic financial experimentation in the twentieth century, and Islamic mortgages represent one genre of experimentation...