Proposed ‘Halal Mortgages’ in Canada Would Benefit Only Muslims?

Claim:

Justin Trudeau’s government in Canada is introducing “halal mortgages” in 2024 to benefit only Muslims.

Rating:

What’s True

Halal mortgages offered by alternative financial institutions have existed in Canada since 2021. Trudeau and his minister of finance announced in 2024 they would explore them as part of the federal budget.

What’s False

There is no language in Canada’s 2024 federal budget stating that such a financial option would be available only to Muslim Canadians. Rather, the language referred to enabling “Muslim Canadians, and other diverse communities, to further participate in the housing market.”

In April 2024, Canada’s Prime Minister Justin Trudeau and Minister of Finance Chrystia Freeland announced that they would explore “halal mortgages” as part of Canada’s federal budget. Many commenters on social media platforms including X (formerly Twitter), Instagram and Reddit quickly criticized the proposal, insisting it would benefit only Muslim Canadians.

In response to an Instagram post claiming, “Justin Trudeau to introduce ‘Halal Mortgage’ for Muslims in Canada,” one person asked, “So would the same arrangements be available to non muslim Canadians?” On X, a user pointed out that under Shariah, interest payments are forbidden:

(X user @AreOhEssEyeEe)

“I intend to apply for one and sue the government for religious discrimination in the event I’m denied,” responded one person, while another chimed in, “I’m going to identify as whatever will get me the most benefits, money, deals, tax write offs … Muslim, non binary, pansexual, transgender female definitely NOT white.”

While the Canadian government is indeed looking into new forms of alternative financing at the federal level as a way to increase home ownership for citizens, policies regarding halal mortgages had not been finalized in April 2024, and there was no language in the budget indicating that such a financial product would exclusively serve Muslim Canadians. As such, we rate this claim a “Mixture” of truth and falsehood.

According to the Government of Canada’s 2024 Budget, under the section titled Halal Mortgages:

Canada is home to a vibrant and growing market of alternative financing products, including halal mortgages, that enable Muslim Canadians, and other diverse communities, to further participate in the housing market.

• Budget 2024 announces that the government is exploring new measures to expand access to alternative financing products, like halal mortgages. This could include changes in the tax treatment of these products or a new regulatory sandbox for financial service providers, while ensuring adequate consumer protections are in place.

In other words, Canada’s proposed new measure regarding halal mortgages does not equal firm legislative changes. Rather, Trudeau’s government is considering new ways to help “Muslim Canadians, and other diverse communities” to own homes, and halal mortgages are one example of such alternative means of financing a purchase.

According to the budget, “In March 2024, the government began consulting financial services providers and diverse communities to understand how federal policies can better support the needs of all Canadians seeking to become homeowners.” The government expected to give an update in the fall.

Under the Canadian Human Rights Act, Canadians are protected from discrimination when they receive services from the federal government, from First Nations governments and from private companies that are regulated by the federal government, including banks, trucking companies, broadcasters and telecommunications companies.

Under Shariah, or Islamic law, charging interest, or “riba,” is prohibited and considered usury, as it fosters an inequitable relationship that disproportionately benefits the lender. Therefore, loans from Islamic financial institutions are structured without interest. 

While some private financial institutions in Ontario and Alberta were providing mortgages that align with Shariah as early as 2021, as of 2024, Canada’s major banks did not offer such services. A potential halal mortgage offered by Canada’s big banks may include additional fees and payment structures to replace interest charges.

Speaking to the CBC in 2022, Walid Hejazi, associate professor of economic analysis and policy at the University of Toronto’s Rotman School of Management, said, “When people in Canada, in the United States heard that Islamic finance forbids interest, we in the West automatically assumed that money was for free,” adding that people who procure such mortgages “still pay a comparable amount that you would pay if you got a conventional mortgage. It’s just that the structure of these mortgages are different.”

In the realm of Islamic finance, institutions offer mortgage and lending products that eschew interest payments commonly seen in conventional banking. Instead, they use three primary modes of payment:

1. Ijara: This is like when you lease a house with the option to buy it later. The bank buys the house and lets you live there while you pay rent. Over time, you may be able to buy the house from the bank.

2. Mudarabah: This is when you and the bank share ownership of the house. You might put some money in, and the bank puts in the rest. As you both profit, you gradually buy more of the bank’s share until you own it outright while living in and maintaining the property. Any profits from the eventual sale would be shared between the homeowner and the lender.

3. Murabahah: This is like a lump-sum purchase, when the bank buys something and sells it to you at an agreed higher price, allowing you to pay in installments over time.

Islam is not the only religion that views charging interest negatively. The Torah says Jews are prohibited from charging interest to other Jews, while many Christian denominations also have condemned charging excessive interest.

Sources