A financial firm plans to open an office in Fairfax County in early March to sell mutual funds to the Washington area’s Muslims, joining banks and investment houses that find the growing U.S. Islamic population can no longer be ignored.
Saturna Capital Corp. plans to sell its Amana mutual funds to the Washington area’s approximately 200,000 Muslims who want to avoid violating Islamic law with their investments.
“They’re fairly young, making a lot of money, well-educated and they’re looking for services,” said Monem Salam, director of Islamic investing for Saturna Capital, which also sells funds that have no religious orientation.
The funds invest only in stocks that are Shariah-compliant, which means they cannot invest in the alcoholic beverage, gambling, pornography, tobacco or pork-processing industries.
Islamic law also forbids Muslims from paying or earning interest.
A Washington-area office “gives us access to all the East Coast,” Mr. Salam said.
The Bellingham, Wash., company, which manages $250 million in Islamic investments, is riding a trend among financial institutions to find a niche among the nation’s Muslim population.
Although Census Bureau data is sketchy, government studies and Muslim groups estimate 6 million to 7 million Muslims live in the United States. Other studies, however, have estimated the number as low as 1.6 million. The Department of Homeland Security says the number is rising with immigration from Muslim countries.
The number of financial services is growing with them.
Last summer, Guidance Financial Group said that in just over three years of operation it became the first Islamic financial-services company in the United States to provide more than half-a-billion dollars in home-financing contracts.
The Reston company operates with more than 85 employees in 17 states and the District.
In Ann Arbor, Mich., a bank that has offered special services for Muslims for two years recently formed a subsidiary specifically for them.
University Bank’s new University Islamic Financial Corp. offers deposit accounts that share profits from the bank’s Islamic real estate investments instead of paying interest.
Islamic investments, such as mutual funds, were profitable last year, although few of them are more than 5 years old. The Dow Jones Islamic Market Index for the U.S., which tracks Shariah-compliant investments, rose 5.06 percent in 2005, compared with a 3 percent increase in the Standard & Poor’s 500 Index.
Last year’s performance was an improvement over the U.S. Islamic Market Index’s annualized five-year return of -2.77 percent. The S&P 500 rose 0.54 percent in the same period.
The financial institutions say business rather than politics is their motivation for offering Islamic financial services.
“For the same reason we would make money on a conventional loan, we would make money on an Islamic financing situation,” said David Loundy, corporate counsel for Devon Bank, a Chicago bank that offers Shariah-compliant transactions.
One of the deals is called a murabaha transaction. The bank buys a property with its own funds, then sells it to a customer under an installment-repayment plan. The buyer gets title to the property immediately after closing on the agreement.
“It’s roughly the equivalent of a 30-year mortgage, but you’re not repaying us principal and interest,” Mr. Loundy said. “You’re simply paying us part of an installment sale.”
For Muslims, either earning or paying interest is “considered one of the greatest sins,” Mr. Loundy said.
Another financing plan, called an ijara transaction, is similar to a rent-to-own contract.
The bank buys a property and the customer pays for it, but cannot claim title to it until the full debt is paid.
“Because you’re using property you don’t own, you’re also renting it from us,” Mr. Loundy said.
Unresolved under Internal Revenue Service rules is whether Muslim taxpayers can claim an interest deduction on their homes or businesses when they are not paying interest.
Muslim groups say their concerns are being taken more seriously as their U.S. population grows.
“The community has obviously grown by leaps and bounds,” said Ibrahim Hooper, spokesman for the Council on American-Islamic Relations, a Washington civil rights group for the Muslim community.