Faith, Hope and a Home of Your Own – PRIO Blogs
Buying a home is the biggest financial investment most people will make and usually involves taking out a loan. A mortgage is the usual solution, but it’s not for everyone. Lack of financial resources is the most common reason for not taking out a loan.
But for some people, the reason is that their religion prohibits interest-bearing loans.
In Islam, there is a clear prohibition of rib- often translated into English as “interest” or “usury”. In Norway, interest-free alternatives to traditional mortgages are not available.
For this reason, in our study of Islamic finance, religion and housing, we have focused on what this lack of Islamic mortgages means for Muslims in Norway. The study gave us insight into the experiences of a small group of people with an immigrant background. It has also generated insights into how religion – and life in accordance with religious beliefs – is lived in one of the most secular societies in the world, where the government seeks to maintain policies that are inclusive of diverse religions and positions of life.
Housing and integration
In Norway, more than three out of four people live in a house that they own or belongs to a household member. Home ownership was a stated political goal in post-war Norway and was seen as a pillar of the welfare state. Many initiatives have supported the idea that everyone should be able to own their own home, although this has become more difficult over time. Home ownership is also an important means of passing assets to the next generation, through inheritance.
The ideal of ‘home ownership for all’ also applies to Norway’s immigrant population. Home ownership is seen almost as an indicator of integration. According to Statistics Norway’s 2017 survey on living conditions of immigrants, more than half of respondents lived in a house owned by themselves or a household member.
However, there is a lot of variation between different immigrant groups. More than eight in ten Pakistani immigrants lived in a house owned by themselves or a household member. The corresponding figure for immigrants from Somalia, however, was two in ten. Many factors, often related to financial status, including employment, income and education, contribute to these disparities. The weather also plays a decisive role: the length of life in Norway tends to vary, at least in part, depending on the country of origin. But other factors also play a role, including immigrants’ various entry points into Norwegian society and encounters with its social norms.
Religion, financial situation and home ownership
For religious people, their religious beliefs can influence their financial choices. We find that Islamic norms regarding money are important to many practicing Muslims. Almost all research participants in our focus groups and interviews agreed that the Islamic ban on interest was important. Meanwhile, this ban has affected their choices in different ways.
Muslim scholars and ordinary Muslims may differ in their interpretations of the Islamic ban on interest, with some understanding riba refer only to interest of an exorbitant or usurious nature. To help members of Muslim minorities buy their own homes, a council of Muslim leaders in Europe has published a fatwa (a court ruling on a point of Islamic law) that allows Muslims to take interest-bearing mortgages in case of “necessity”, that is, when no alternative is available. This exception is justified on the grounds that owning a home is important in order to enjoy a stable and secure way of life similar to that enjoyed by others.
There are no statistics on attitudes towards riba among Muslim homeowners in Norway, but analyzes of data from Statistics Norway’s 2017 survey suggest that high self-reported levels of religiosity among Muslims provide little explanation for why an individual is not a homeowner.
Through qualitative interviews, we were able to better understand the practical impact of people’s religious beliefs on financial status. Aisha is a fictional character, based on ideas from our research participants: For Aisha, buying her own apartment is a dream. Aisha is a trained social worker; she has a permanent job and she would qualify for a mortgage to buy an apartment – if that was what she wanted. Aisha chooses not to buy her own house because she doesn’t want to take out an interest-bearing loan. She considers riba be haraam – forbidden and sinful for her as a Muslim. Instead, she rents an apartment, but she’s frustrated that she can’t buy, unlike the people around her. She often thinks that paying rent is like throwing money away. Aisha wants to buy a house and invest in something she can pass on to her children. She is confident that a solution will emerge that will allow her to buy an apartment without having to compromise her religious beliefs, even though such a solution would likely be more expensive than a conventional mortgage. In the meantime, she puts money aside every month.
Choice, Opportunity and Belonging
Among our research participants, we see two approaches to disallowing interest: some people agree with the idea that interest-based mortgages are permitted “out of necessity”, while others choose not take out a mortgage for religious reasons. The socio-economic consequences are very different for these two groups. People who avoid getting a mortgage for religious reasons, whether or not their financial circumstances also play a role, face negative consequences. These consequences are amplified in Oslo’s tight rental market, especially for people with school-aged children, who may have to move several times during the course of their children’s education.
Also, different standards apply in the different Norwegian Muslim communities. Among our research participants, we found that people of Pakistani origin were often willing to pay interest “out of necessity”, while those of Somali origin were more likely to view interest as strictly prohibited.
Even those who chose to take out interest-bearing loans to buy a house felt that the importance of religion in life decisions was not really recognized in Norwegian society. Such a real or perceived lack of recognition of something important in one’s life can have a negative impact on one’s sense of social belonging.
This raises questions about how a society that strives to be pluralistic in its approach to all religions and all walks of life will respond to a more diverse population, both in the realm of political housing and more specifically in relation to what are supposed to be “ethically neutral agreements”.
Regardless of religion, a diverse population places new demands on the housing market, with immigration contributing to more diverse housing trajectories. This includes people who enter the housing market at a later stage in life without inherited wealth, and others who wish to live in multigenerational households. This diversity makes more urgent the need for a housing market with different pathways to homeownership, as well as other viable alternatives to homeownership.