The Current Approach Of The American Islamic Finance Essay
The path to overindulgence has evolved into, and revolves around, the allure of easily available financing. Conventional mortgages, being the largest financed product of Americans, are the proverbial marshmallow.
The statistics show that we, as an American society, not only have been offered said marshmallow, in the form of easily available money, but that we have binged on them.
What is more frightening, for the American consumer, is that the answer of the financial sector to this convoluted problem is to increase lending! This subtly appears in the form of reducing the monthly obligation, interest only products or lengthening the term of borrowed funds. Hence it is now common to see car loans up to 7 or even 10 years. Home loans have seen such things as interest only loans and even 40 year terms. Credit cards minimum payments have similarly decreased to amounts such as 1% of the principal balance; translating to a payment (and balance) that will continue on practically for an indefinite time!
The current approach of the American Islamic Finance sector to this complex scenario of [home] finance revolves around the exclusion of interest from the transaction between the homeowner and the financing entity [the primary transaction].
The de facto result is, regardless of your view on the respective permissibility, a finance method focusing on the mechanism of the transaction while inadvertently utilizing the industry benchmarks. Currently the most…