Julie Stackhouse - Community Affairs Officer
Published August 1, 2002 | August 2002 issue
Over the past decade, the cities of Minneapolis and St. Paul and the surrounding area have experienced rapid growth in immigrant populations, including many Muslims from East Africa and other parts of the world. Individuals in the Muslim community have the same financial needs as any other consumers, but certain principles of their Islamic faith prohibit them from paying or receiving interest. Other, smaller faith-based communities, such as some Jewish and Christian groups, are similarly prohibited. The situation creates a need for alternative financial products that are not structured around interest payments.
In response to the issue, the Community Affairs Department of the Federal Reserve Bank of Minneapolis is facilitating an initiative to identify alternative credit products for the Twin Cities market. This edition of Community Dividendfocuses on the findings and accomplishments of that initiative.
Some readers may question why Muslims and other interest-averse groups will not simply adapt their beliefs to the American financial system. Some Muslims do use conventional, interest-based financing if there is no other choice available. But others do not, and alternative credit products for interest-averse communities provide opportunities for borrowers and lenders alike.
Our cover story provides an introduction to the Islamic principles governing financial transactions and addresses some of the key issues that regulated financial institutions in the United States are likely to encounter when designing credit products for interest-averse consumers. It also summarizes the accomplishments of the Twin Cities Islamic-financing initiative to date. Sidebars accompanying the main article provide information about existing products and mechanisms that can serve as models for new lending alternatives.
A related feature reports on the challenges involved in determining the size of the Twin Cities Muslim population. As the article explains, authoritative population figures for faith-based communities are currently unavailable, so estimates must be drawn from other sources.
Finally, in "A Conversation with . . .," two individuals who are active in efforts to develop alternative-lending products in the Twin Cities discuss aspects of Islamic financing. Wafiq Fannoun of Minneapolis' Northside Residents Redevelopment Council offers a community development practitioner's perspective of the issue, and Hussein Samatar of Wells Fargo shares a banker's view.
As this edition of Community Dividendindicates, meeting the credit needs of interest-averse groups is a challenge, but solutions can be found through discussion and collaboration. We are pleased to share that lesson with our readers, and welcome any comments or questions you may have about the information presented here.