Pursuing an American Dream While Following the Koran


By SUSAN SACHS



fter moving his growing young family into rental apartments, his
in-laws' house and then again into a rented condominium, Sal
Spiteri scraped together the money for a down payment last year and
bought his first home. It is a milestone that brings joy to most
people, but it pained Mr. Spiteri, and he said that it tormented
him still.

The problem is the mortgage he had to take on his new house in
North Babylon, N.Y. As observant Muslims, the Spiteris try to
follow the Islamic prohibition on paying or receiving interest.
They pay their credit card bills in full each month. They keep
checking but not savings accounts. And when they were ready to buy
a home, they sought help from an Islamic cooperative in Houston,
the MSI Financial Services Corporation, one of only a handful of
such specialists in the country.

That was five years ago. The couple — Mr. Spiteri became a Muslim
and his wife, Hoda, is from Egypt — are still on an MSI waiting
list for financing.

"It's frustrating when you know there is a right way and a wrong
way, and you're being driven toward the wrong," said Mr. Spiteri, a
program manager with Symbol Technologies Inc. in Holtsville, N.Y.
"A lot of people say, `We're in America and we can't change the
rules.' I think the important thing is realizing it's wrong and
trying to change it."

Faith has never been much of a factor in the mortgage business and
fashioning products to accommodate religious requirements is a
novel, even mystifying, idea for regulated institutions like banks.
But, mindful of the country's changing demographics, some financial
services companies now see the estimated five million to seven
million Muslims in America as an untapped market that is growing
enough in numbers, wealth and sophistication to justify specialized
products.

At least one major lender, HSBC Bank USA, is already positioning
itself to mine the Muslim home financing market in the New York
City area. Bank officials say they plan to offer a plan tailored to
Islamic precepts as early as September to potential home buyers in
Brooklyn, Queens and elsewhere on Long Island, where 90 of its 437
American branches are situated. The bank is the American unit of
HSBC Holdings, the British parent of the Hongkong and Shanghai
Bank.

"Our target market is the second and third generation, educated,
middle- class Muslims — the American who believes in his religious
values but at the same time is proud to be an American and wants
the American dream of owning a car and a home," said Iqbal Khan,
head of global Islamic finance for HSBC.

While the biggest demand by far is for home financing, he said,
HSBC also is promoting its checking accounts and debit cards as
products sensitive to Muslim needs.

The Muslim market, however, is not a typical immigrant or ethnic
market that can be reached simply by educating people about
American-style credit or translating mortgage documents.

They may be, as Muslim leaders argue, the fastest-growing subgroup
in the national mix. But American Muslims are also a diverse lot of
varied national origins, economic status and views toward
Western-style credit. While some form of lease-purchase or
partnership contract is the standard model for Islamic finance, the
details of how it should be structured are a matter of much debate.

So is the more basic issue of whether a conventional bank, with
its other interest-based revenues, is a permissible partner for a
Muslim. And since Islam requires that the parties to any contract
share equally in the risk, there is disagreement over whether it is
proper to participate in a regulated transaction that gives a bank
the right to foreclose in the case of a default.

Even Islamic scholars have yet to reach a consensus. Ordinary
Muslims, then, tend to take more conservative or skeptical views.

"Because the whole world is based on interest, you sometimes get
interpretations that say if you are buying a house and living in
it, it's O.K. to have a mortgage, or it's O.K. if you don't get a
big house," said Farrukh Siddiqui, a Pakistani-born Web site
developer in Levittown, Pa. who rents an apartment for his family
of four. "But a lot of us living in this country now have come to
realize this whole interest thing is something we really have to
avoid."

HSBC is not alone in entering the Islamic finance business.
Recently, a number of smaller mortgage banks and finance houses
also announced their interest in the market, following in the steps
of the mortgage financing company Freddie Mac, which has promised
to provide much-needed liquidity to the Islamic finance business.

In late March, Freddie Mac, which is shareholder-owned and
government-chartered, announced it would invest in Islamic
financing contracts that conform to its eligibility requirements,
starting with the purchase of an estimated $1 million in contracts
from the American Finance House- Lariba, a small Islamic lender in
Pasadena, Calif., that has financed several dozen home purchases
through a lease-to-own contract marketed to American Muslims.

Saber Salam, vice president for customer strategies and offerings
at Freddie Mac, said he has been contacted by many major banks,
mortgage brokers and other institutions that are developing
financing options for Muslims.

Based on their interest and on the agency's estimate of the
potential Muslim market, he added, Freddie Mac expects to
participate in $3 billion to $5 billion in such contracts the next
few years.

If the volume reaches that level, it would represent just a tiny
fraction, about 1 percent, of all the home loans that Freddie Mac
and its older cousin Fannie Mae participate in each year. But it
would be a huge advance for the Islamic home finance market, long
limited mainly to homegrown cooperatives like MSI and Lariba that
were handicapped by a lack of capital.

The market includes Muslims who have already bought houses using
conventional mortgages but, like the Spiteris, want to refinance,
as well as those who held back from buying homes because of a lack
of Islamic alternatives.

To make the program work, Freddie Mac also plans to raise money by
selling a bond based on those contracts, an investment that it can
promote to Islamic investors overseas as religiously correct.

The rather sudden interest on the part of financial institutions
in the United States is partly a response to the heightened
visibility of American Muslims as they have become more politically
active and concentrated in big cities. A substantial number have
college educations and household incomes above $50,000 a year.
About 40 percent are African-Americans, Muslim organizations say,
and the rest are a mix of people of Southeast Asian, East Asian and
Arab descent.

At the same time, banks are responding to the growing confidence
of many younger Muslims who now demand accommodation from the
society around them.

"My parents came here from Pakistan with a very strong impulse to
compromise for the opportunities available," said Naveed M.
Siddiqui, vice president for North American marketing at IslamiQ
(pronounced Islam I.Q.), a two-year-old Muslim- run company that
advises financial institutions and investors on developing Islamic
financing and investment products.

"They figured that they were going to a country where there are
few mosques, no real Muslim institutions and as much as they could
they would stick to their way of living," he added. "The idea was
to buy the right house, even if it meant getting a mortgage, and
live in the right neighborhood and be all-American."

Mr. Siddiqui at IslamiQ, 31, grew up as an American, in Roslyn,
N.Y., and said he and others of his generation feel more of a sense
of entitlement. "That's why the demand for Islamic finance is
increasing," he said. "A lot of people are growing up in the West
and adapting to Western products. And they're saying, `Let's make
demands on the market.' "

Until recently, American Muslims looking for an alternative to a
conventional mortgage could turn to self-help groups that pooled
money from investors and placed it in a revolving fund that bought
homes and leased them to Muslim families.

Abid Shaikh, a vice president at a Merrill Lynch office in
Plainsboro, N.J., took a slightly different route. He used his own
money to buy homes in partnership with Muslim couples who purchase
his stake over time through a lease based on the fair market rent
of the house. He has just started a car-leasing business on the
same principle.

Although some of his colleagues might think that he has sacrificed
his own comforts for his faith, Mr. Shaikh, a 40-year-old who was
born in India, said he is not concerned.

"I live in a town house which I bought with all cash," he said.
"My peers, including those who are not vice presidents like me, are
living in houses three times as big as mine. Since I have belief in
me, those things are not bothering me."

The biggest American experiment in Islamic home-buying contracts
was run by the United Bank of Kuwait, which ceased operations in
the United States after its merger with the Al-Ahli Commercial Bank
of Bahrain last year to form the Alhi United Bank in Bahrain.
During the two years before it closed in New York, the United Bank
of Kuwait bought and leased back 60 homes for American Muslims.

Its experience provided some valuable lessons. Former employees of
that bank said they found that women are often the driving force in
a family to find an Islamic alternative to financing; that
prospective customers will tolerate somewhat higher monthly
payments than a conventional fixed-rate mortgage but not a great
deal higher; and that sellers and real estate agents tend to view
an unfamiliar financing contract with skepticism.

Abdulkader Thomas, the former general manager of United Bank of
Kuwait in New York, has now formed an Islamic mortgage bank, in
partnership with Capital Guidance a real estate investment company
in Washington, and a marketing firm, MEF Money, based in McLean,
Va. He said he hopes to have the bank licensed in 15 to 20 states
by September and then to begin offering home financing contracts
that would be based on a partnership contract between the bank and
the home buyer.

Within a year, American Muslims will have a wide range of
financing choices, predicted Abdul-Hakim Dyer, another veteran of
the United Bank of Kuwait program.

"There is going to be a mix: small organizations, conventional
brokers, big banks," he said. "I wasn't talking this way a year
ago. But I've been amazed at how many people were watching what we
did" at United Bank of Kuwait.

Mr. Dyer, an independent consultant based in Stamford, Conn., said
that he, too, plans to start an Islamic services business.

"The Muslim community is increasingly sophisticated, regardless of
generation," he said. "You may drive a taxi, but you know how to
finance a medallion."

"What they're really looking for," Mr. Dyer added, "is an
opportunity to get it right, to fit in, to enjoy what everyone else
enjoys and take it to the next level."

http://www.nytimes.com/2001/07/05/business/05ISLA.html?ex=995357503&ei=1&en=52b1c1c350f55e4e

/-----------------------------------------------------------------\


Visit NYTimes.com for complete access to the
most authoritative news coverage on the Web,
updated throughout the day.

Become a member today! It's free!

http://www.nytimes.com?eta




_________________________________________________________________
Get your FREE download of MSN Explorer at http://explorer.msn.com/intl.asp

----------------------------------------------------------------------------

To unsubscribe/subscribe or view archives of postings, go to the Gambia-L
Web interface at: http://maelstrom.stjohns.edu/archives/gambia-l.html
You may also send subscription requests to [log in to unmask]
if you have problems accessing the web interface and remember to write your full name and e-mail address.
----------------------------------------------------------------------------