new Muslim bank has no interest payments

[ScreamingEagle]

This bank, University Islamic Financial in Ann Arbor caters to Muslims and the Shariah legal code. Is this even legal under FDIC rules?

Under Shariah law muslims are not supposed to pay interest so on their home loans they pay "rent" plus set up a savings account to pay it off. I wonder if they get to write off their "rent" on their taxes?

MICHIGAN — A bank that has been offering special services for Muslims for two years has now formed a subsidiary to focus solely on the religious group.

The Ann Arbor-based University Bank has created the University Islamic Financial to offer Muslims home financing, deposit accounts and Islamic mutual fund shares.

“The formation of the subsidiary allows us to have a financial institution which is 100% in compliance with the Muslim Shariah, the legal code of the Islamic religion,” said bank president and chairman Stephen Lange Ranzini at the weekend.

Among the laws of Shariah is a ban against paying or receiving interest. The bank’s Islamic deposit accounts allow Muslims to open accounts where any profits are shared rather than paid as interest.

University Bank also offers a mortgage alternative loan transaction programme, which replaces a traditional home loan with a redeemable lease.

The bank holds the home in trust, and a home buyer makes monthly payments to that trust. Each rent payment includes a set amount of savings, which builds the buyer’s equity in the home. When the savings account equals the home’s original purchase price, the buyer owns it.

The mortgages are offered across the state, with 57 families in the Detroit area having such loans, and Ranzini said plans are to offer such mortgages nationwide. Other banks also are targeting Muslims, said Tracey Mills, a spokeswoman for the American Bankers Association trade group.

“There have been banks that have formed relationships with the Islamic community,” she said.

The Institute of Islamic Banking & Insurance, an independent Islamic finance academic and research group in London, says that more than 250 Islamic banks around the world manage more than $200bn.

Ranzini said the University Islamic Financial would allow the University Bank to expand its capital base.

He expects the bank, a subsidiary of the Ann Arbor-based University Bancorp financial holding company, will double its assets, which were listed at $56,5m on September 30.

He said the corporation was formed with $15,5m raised through the sale of 40000 shares of private stock.

The bank owned 80% of the corporation while the remaining 20% was held by Virtue Investors, a group of private investors from Grand Rapids, Michigan, Ranzini said. With Sapa-AFP
http://www.businessday.co.za/articles/world.aspx?ID=BD4A133345

 

[Annie]

It appears that the bank does not have FDIC backing, rather it's trying to get accounts that do have the backing, from the holding company. Right up front they say catering to Muslim customers, which sounds like 'others not welcome.' Operating under Sharia laws, which ahem, are not 'the law' of Michigan. Where's the ACLU?:

http://www.marketwire.com/mw/release_html_b1?release_id=104992

$15,581,000 Deal Forms 1st U.S. Sharia'a Compliant Banking Sub
Investor Group Buys 20% of Sub Common Stock for $3,000,000

ANN ARBOR, MI -- (MARKET WIRE) -- 12/30/2005 -- Stephen Lange Ranzini, President and Chairman of Ann Arbor's University Bank (NASDAQ: UNIB), announced the formation of University Islamic Financial Corporation (UIFC). UIFC is capitalized with $15,581,000 in shareholder equity and assets and is the first ever U.S. Islamic Banking Subsidiary to be formed. In connection with the formation of the subsidiary, University Bank sold 20% of the common stock of UIFC for $3,000,000 to Virtue Investors, LLC, at a 50% premium to book value, which will generate a capital gain for University Bank of $1,000,000. Of this amount half of the subscription ($1,500,000) was received today and half will be received by February 15, 2006. Following the transaction, University Bank holds 80% of the common stock of UIFC with a cost basis of $8,000,000 and $5,581,000 Series A non-convertible preferred stock of UIFC.

Ranzini commented, "This transaction represents a major milestone in University Bank's Islamic Banking activities and gives us the resources to put us on an accelerated growth curve. It also establishes a valuation on our Islamic Banking subsidiary with a $5 million premium to book value and increases our consolidated Tier 1 capital base by $3 million to over $7.5 million. From the point of view of our shareholders, with this transaction and the recent relocation of the bank's headquarters, we have more than doubled the bank's capital over the course of the year with minimal dilution of the existing shareholders."


UIFC intends to engage in Islamic Banking with an initial focus on its existing product set: soliciting Islamic Sharia'a FDIC-insured Deposits held by University Bank and originating Islamic Sharia'a home financings as agent for University Bank. UIFC's products have received favorable legal rulings (fatawa) from some of the leading Islamic legal scholars in the U.S. and the world. University Bank is also in the final stages of negotiating a master commitment with a major Government Sponsored Enterprise to create a secondary market for UIFC's Sharia'a compliant home financings nationwide.

For additional information about UIFC's Sharia'a compliant products and its fatawa, see www.university-bank.com/IslamicBanking/IBDmain.htm.

Ann Arbor based University Bancorp owns 100% of University Bank which manages a total of $3.3 billion in assets. University Bank is an FDIC-insured, locally owned and managed Community Bank primarily serving the cities of Ann Arbor and Ypsilanti of Washtenaw County. The Community Banking operation focuses on local businesses, minorities and the non-profit communities. University Bank is the only financial institution headquartered in Washtenaw County to be rated "Outstanding" by the FDIC for Community Service and Community Reinvestment. Other Community Banking specialties include highly competitive deposit products for business owners, residential mortgages, commercial real estate lending and insurance, investments and money management through its wholly owned subsidiary University Insurance & Investments, Inc. In addition to its Community Banking operations, University Bancorp specializes in Islamic Banking through 80%-owned University Islamic Financial Corporation and also in mortgage subservicing and mortgage origination primarily serving credit unions through the Bank's Houghton-based 80%-owned subsidiary, Midwest Loan Services.

Any prediction of the future is inherently not assured. Investors should read the risk factors listed on pages 21 and 22 in the Company's report on Form 10K for the year ended December 31, 2004, and any prediction in this release is intended to be covered by the Safe Harbor provisions of Section 21E of the Securities Exchange Act of 1934.

Additional comprehensive investor relations information on University Bancorp is available at www.university-bank.com/bancorp.htm.

 

[ScreamingEagle]

It appears that the bank does not have FDIC backing, rather it's trying to get accounts that do have the backing, from the holding company. Right up front they say catering to Muslim customers, which sounds like 'others not welcome.' Operating under Sharia laws, which ahem, are not 'the law' of Michigan. Where's the ACLU?:

http://www.marketwire.com/mw/release_html_b1?release_id=104992

Right, if this was a special Christian bank organization operating under separate "Christian laws" the ACLU would be foaming at the mouth.

If the bank does not have FDIC backing it is just a small private bank that poses no legal problem I suppose. And 15mil is not a whole lot, but it's a start.

However, it is a problem that Muslim groups think they must economically operate separately from the rest of us according to "their" rules. Whatever happened to the "melting pot"? This is another way how separatist groups begin forming which eventually tear a nation apart. It's just amazing how our freedoms are twisted and used against our country.

Savage brought up this topic yesterday and may have more to say about it later today on his radio program. I wonder how many muslims will give up their tax write-off to pay "rent" instead of interest...they had better not get the tax write-offs! :fu2: