Minneapolis adapts municipal loans to Islamic law
The city is modifying its financing system so that the Islamic prohibition on paying interest does not become an obstacle.
Minneapolis City Council website
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In Minneapolis, Islamic law is no obstacle to accessing municipal loans: It is the Town Council that adapts the system.. The city offers a financing programme designed so that business owners who refuse to pay interest for religious reasons can obtain public funds without breaching the ban. The formula is simple: The 2% which, on a conventional loan, is charged as interest is now presented as a 2% «rate of return»..
A municipal programme that was running quietly has entered the national debate after journalist Natalie Winters published it on X and Alpha News It made the headlines. In reality, you only need to go to the town hall's website to check that The «alternative financing» section is presented as «in accordance with Islamic law.».
An interest-bearing 2 % converted into a yield-bearing 2 %
The municipal formula is simple. Minneapolis's conventional programme lends money to small businesses and charges 2.1 per cent interest on the portion provided by the city. But since the charging or payment of interest is prohibited by Islamic law, the City Council offers an alternative structure: Instead of charging an interest rate of 2%, it charges a “return fee” of 2%..
The city itself maintains that, despite the change in terminology and structure, The financial return is equivalent to that of a conventional loan.. That is to say, the City Council does not renounce the financial return: it adapts the way of collecting it so that the product is acceptable to Muslims.
Sharia also enters into Minnesota mortgages
The adaptation does not end with Minneapolis's municipal loans. The same Minnesota Department of Revenue It has a specific section dedicated to the “Shariah-compliant home financing”. The state administration explains that these mortgages are usually structured with components of “cost plus benefit” instead of the traditional “principal plus interest”.
Minnesota has even adapted the way the mortgage registration tax is calculated for these products. The Department of Revenue recommends that, in a Sharia-compliant mortgage, the tax be applied only on the cost of housing and not on the portion corresponding to the financier's profit, to prevent the latter from being taxed as if it were mortgage debt. That is to say, The religious peculiarity of the product is already expressly provided for in the State's tax instructions..
The debate, therefore, goes far beyond a simple name change between “interest” and “rate of return.”. Minneapolis has adapted a municipal programme and Minnesota has provided specific tax treatment so that certain financial products comply with an Islamic religious prohibition. Formally, these instruments can be used by any citizen, but their origin and justification are explicitly religious.
The case shows to what extent some Western administrations have gone from guaranteeing religious freedom to Redesign public services and instruments to be compatible with specific confessional precepts.. In Minneapolis, the charter does not legally bind the City Council; however, since 2007 it has been significant enough to prompt the City Council to change the way it lends money.
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