NAB plans for "Muslim-friendly" loans

Friday June 26, 2009

National Australia Bank has recently announced plans to introduce a new option in loans with the commencement of "Muslim-friendly" loans which don't charge interest in compliance with Shari law. The NAB stated that it will make money through alternative means including profit-sharing on any leasing, transaction and joint-venture arrangements through an Islam-approved line of finance.

This style of finance is based on the Islamic ban of unfair lending or usury which allows a Muslim mortgage to be created when a bank will buy a property and sell it themselves to their banks customers at a profit. The banks customers will make repayments for the entire sum in installments. The benefits of this banks option is that the profit margin is established from the beginning and creates a loan that is not affected by interest rate rises, very convenient on today's market.

The NAB stressed that this was the introduction of such a process to determine its success and demand and will commence with small loans that need to be approved by a Sharia Advisory Board which will see that all necessary criteria is set before being allowed for public use.

The initial loans, which will be available to both Muslims and Non-Muslims, will offer interest free loans of up to $1000 designed for finance expensive household items with an initial trial through which the NAB will invest $15 million from the NAB not-for-profit finance division to kick start the program and distribute all funding though several community finance schemes. As a result, NAB will assess potential demand and popularity.

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