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Shari`ah Loans for Minneapolis Businesses

Published: 07/02/2012 05:19:23 PM GMT
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CAIRO - Helping Muslim businesses to operate and expand in line with Islamic teachings, the US city of Minneapolis is offering a new scheme of Shari`ah (more)

CAIRO - Helping Muslim businesses to operate and expand in line with Islamic teachings, the US city of Minneapolis is offering a new scheme of Shari`ah-compliant loans.“It feels like, looks like and acts like a loan, but it's just a different way of looking at it,” Hussein Samatar, executive director of the African Development Center, told Minnesota Daily on Tuesday, February 7.

The city, in cooperation with the ADC, offer Shari`ah-compliant loans to business owners by using a fixed rate in place of a variable interest rate.

Instead of charging interest, the city and the ADC estimate how long it will take the business to pay off the loan and totals what the interest would be.

That amount is added as a lump sum to the total cost of the loan.

These loans amount around $5,000 to $10,000 to be paid off within three years, Becky Shaw, an economic development specialist with the city, said

She noted that though loans are targeted toward Muslims, any business owner can apply for a similar loan with an interest rate that has a similar effect as the Shari`ah-compliant loans.

Minneapolis, the largest city in the state of Minnesota, also offers a handful of other business assistance programs.

Through the Alternative Financing Program, small lenders, usually the ADC, will offer a loan and the city will match it up to $50,000.

Business owners then pay back the lender and the city.

Abdulwahid Qalinle, an adjunct associate professor of Islamic law at the University of Minnesota, said interest rates are not acceptable under Shari`ah law.

“Islam has specific guidelines where people can acquire wealth and how to spend their wealth,” Qalinle said.

Islam forbids Muslims from receiving or paying interest on loans.

Islamic banks and finance institutions cannot receive or provide funds for anything involving alcohol, gambling, pornography, tobacco, weapons or pork.


The Shari`ah-compliant loans program, which started in 2006, has proved successful with only one loan gone into default out of the 54 given loans.

“This really, truly has been one of the phenomenal success stories of Minneapolis,” Samatar said.

According to a 2009 report from the Small Business Administration, the national default rates are around 12 percent.

The loans program has won plaudits from Minneapolis Muslims, who praised the state for offering them funding according to Islamic Shari`ah.

In 2005, Abdi Adem, the owner of Afrik Grocery and Halal Meat on Cedar Avenue, needed to find a loan that complies with his religious beliefs.

Through the city's loans, Adem borrowed $42,000 and was able to expand his halal meat section and purchase new equipment, which he said helped attract new customers. Adem paid off his loan in 2009.

“I benefited very much from the loan. The customers liked the new store and we liked it,” said Adem.

Though he does need any loans currently, he said it is nice to know the loans are available to him.

“I don't want to go to the bank and get charged for interest,” Adem said.  

“If I need more funds, I can use [the program] again, not now, but if I need it I can go and get it.”

Reproduced with permission from