5 ms·
Very interesting--I had never heard of this before. It seems the higher interest rate is predicated on finding investors who want to take loans at higher-than-
by my_username_is_ 8y ago
Very interesting--I had never heard of this before.
It seems the higher interest rate is predicated on finding investors who want to take loans at higher-than-market-clearing rates. Does anyone have any insight into why non-Muslims are getting loans through these banks? I don't see how this scales to consistently provide higher returns, especially as more money moves into this system. Are tobacco and alcohol related loans failing at a higher rate than the rest of the market?
- lmm 8y agoI would expect a sharia bank to provide market-beating returns to investors because it can charge above-market mortgage rates to borrowers who have no alternative. From the article: > Al Rayan’s home purchase plan (its sharia-compliant version of a mortgage) charges 4.24% in the first two years, almost double the market average. Even so, 12% of Al Rayan’s home-purchase customers are non-Muslims. I'm as stumped as you are regarding that 12% number though.
- toast0 8y agoPaying a little more makes sense for religious or preference reasons , but paying twice the rate (when it's significant) doesn't make a lot of sense for a preference. It seems likely that there is something wrong with the comparison , either the effective rate is computed incorrectly, or there's a significsnt difference in terms or underwriting.
- tareqak 8y agoMaybe some non-Muslims don't want their money to go into arms, alcohol and tobacco? The Economist also forgot to mention gambling too. Edit: there -> their
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