Small US bank goes Islamic, rides storm
DETROIT: Big financial institutions have been battered by mortgages gone bad. But a tiny Michigan bank is getting attention in the industry by turning a profit on loans without even charging interest. Its specialty: financial products that comply with Islamic law. That means no collecting interest, no short selling and no contracts that are considered exceedingly risky. It also rules out some of the activity that got Western finance in trouble - subprime mortgages, credit default swaps and the like.
When you look at the economic crisis we're in, if you were to follow Islamic or sharia financing, you couldn't have this crisis," said John Sickler, corporate director for the bank, University Islamic Financial Corp in Ann Arbor. Islamic finance operations aren't prohibited from making a profit. Far from it. Instead, banks that comply with Islamic law, or sharia, earn money from fees that are part of the cost of the loan, some paid up front and some over time.