Norwegian bank trials 'halal loan' based on Islamic principles

A Norwegian bank has proposed a “halal” loan scheme based on Islamic principles which forbid charging interest.

Storebrand, which operates in Norway and Sweden, launched a website calling for feedback on an idea to launch new interest-free loans to appeal to Muslim home buyers who many not want to take out a traditional mortgage because of their faith.

Under most interpretations of Islamic law, charging interest or fees on financial loans – known as usury – is considered “haram”, or forbidden.

But under Storebrand’s scheme the mortgages will be replaced by deals which allow the owner and the bank to jointly own a house with the loan holder paying rent until they become the sole owner.

The bank called on “interested parties” to get in touch and within a week around 300 people had expressed an interest.

Norwegian Islamic organisations such as the Islamic Council of Norway and the conservative youth movement IslamNet urged their Facebook followers to show interest in the loan.

In a statement on the now closed website, the bank said: “We wanted to find out if this can be another way for people to get into the housing market with ever higher prices.

“The product may be appropriate for young people, for graduates and people who can not take up ordinary mortgage due to religious considerations.”

The bank’s communications director, Bjorn Erik Sættem, told Norwegian newspaper Vart Land: “Storebrand is now evaluating the market potential for such a loan and look at how the product might look like.

“We have also been approached by financial advisers in the UK and Malaysia who want to help us to create this type of loan”.

The move follows a similar scheme set up in the UK in 2013.

Al Rayan Bank, based in West London, offers rental-based loans on similar terms to traditional interest rate mortgages.