EDMONTON, Alberta–Servus Credit Union is reporting it has begun testing an alternative mortgage financing product called the Servus Halal Mortgage that is compliant with Islamic law.
The service is being offered through its subsidiary, Servus Halal.
“Typical Canadian mortgage structures are interest-based,” the credit union said in a statement. “Recent amendments to Alberta legislation allow provincially regulated financial institutions to offer more financing structures in addition to the traditional interest-based financing structures. Servus Halal customers will be able to choose to finance a home purchase through a cost-plus-profit agreement.”
The credit union said the structure also meets the principles of Islamic finance. where paying interest is not allowed.
“Working together with key stakeholders to make halal mortgages widely accessible to consumers is an exciting demonstration of Servus’s innovation and leadership in the industry,” President and CEO Ian Burns said in a statement. “One of the founding principles of the credit union system is to provide specialized products that meet the evolving needs of our diverse population while driving growth for members. We proudly continue this tradition today, making home ownership accessible to more Albertans through the Servus Halal Mortgage.”
Working Group Members
According to Servus CU, it and the main working group members – the Government of Alberta’s Treasury Board and Finance ministry; the Canadian Islamic Finance Board (CIFB), an initiative led by Al Rashid Mosque; and the Credit Union Deposit Guarantee Corp. (CUDGC) – collaborated to find the path forward to provide alternative financing options, including a halal mortgage. Each organization contributed specialized expertise to ensure the perspectives of legislation, regulation, community and industry were each represented, Servus CU said.
Inclusivity & Fairness
“Access to alternative finance mortgages promotes inclusivity and fairness by providing Albertans with more options when buying their home,” Nate Horner, resident of Treasury Board and minister of finance, said in a statement. “I am proud that we introduced legislation that made Alberta the first jurisdiction in Canada to enable provincially-regulated financial institutions to offer alternative finance mortgage products.”
Specialized Training
CIFB has provided specialized training for Servus Halal employees in Islamic finance principles and will provide annual certification of Servus Halal’s products, according to the credit union.
During the testing phase, June through August, CIFB will audit Servus Halal processes and documentation to ensure compliance with principles of Islamic finance.
As its regulator, Servus CU said CUDGC provided subject matter expertise and regulatory guidance to the project that was key to enabling alternative finance mortgages to be offered.
Ongoing Advising
The credit union, which recently became Canada’s largest following a merger, said CUDGC will continue to regulate and advise credit unions on their business practices as they develop innovative products and services for members.
About the Product
The Servus Halal Mortgage is a 25-year, cost-plus-profit home financing structure, which meets the requirements of a Murabaha agreement within Islamic finance principles.
“The consumer pays the cost of the home plus an agreed-upon profit amount for the financer,” Servus CU explained. “Payments are the same each month for the 25-year life of the mortgage, providing consistency and predictability for the homeowner.”