Big four bank NAB has launched a line of Sharia-compliant home loans, which is a growing sector of Islamic finance.
Islamic Finance: Sharia-compliant home loans explained
One of the core principles of Islamic business culture is that it's based on trade-based relationships, and what this means in practice is that home loans cannot charge interest - money itself cannot earn money.
In accordance with Sharia law, a lender must provide some form of service to earn its profits.
The most prominent model used in Australia is called 'Ijarah Muntahia Bittamleek', where the lender buys the house for the client and then rents it to them over a fixed term - usually decades.
In Western culture, this is commonly called rent-to-buy.
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