Islamic mortgages for all faiths: Scotsman

By GRAHAM BURNSIDE

THE need to return to traditional banking values is a debate that has been well and truly reignited by the economic crisis.

Ethics and responsible lending are high on the agenda as we come to terms with the fallout from the crises that have hit some of the world's leading banks. It is therefore not surprising that attention is turning increasingly to Islamic finance as a stable alternative.

While "toxic" debts have swamped conventional banks across the world, Sharia'a compliant financial products have continued to expand. Islamic institutions have avoided massive writedowns in their assets because they carried no exposure to complex financial instruments or derivatives.

Following its ethical principles, all financial transactions within an Islamic finance system must be connected to a tangible asset. Islamic banks use their own funds and will not issue interest-bearing instruments to finance loans; they avoid transactions which are essentially speculative and trading in unowned assets (such as short selling) is prohibited.

But it would be a mistake to think that Islamic finance is only for the Muslim community. It is open to all faiths and Scotland's new Islamic mortgage could, for instance, provide a novel stimulus to support Scotland's property market.

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