Proposed legislation opens door for interest-free mortgage options for Muslim homebuyers
Alberta has introduced new legislation that would allow government-regulated banks to offer halal mortgages – interest-free home financing for Muslim homebuyers who cannot use traditional mortgages due to religious principles.
If passed, the new law would make Alberta the first Canadian province to enable provincially regulated financial institutions to provide halal mortgage products.
For many Muslims, traditional interest-based mortgages conflict with Islamic law, which prohibits both paying and receiving interest. Though some private lenders, like Edmonton’s Canadian Halal Financing Corp., have designed alternative mortgage models to fill this gap, mainstream banks in Canada have yet to offer similar options.
Alberta’s proposed legislation could change that, opening up new possibilities for credit unions and ATB Financial, a Crown corporation, to create financing models tailored to Muslim homebuyers.
“We are not requiring any financial institutions to implement alternative financing models, but clearing the way for any who wish to offer these models to do so,” said Alberta Finance Minister Nate Horner.
Horner expressed confidence that these financial institutions would move quickly to develop these products, given that the industry itself had actively advocated for these legislative changes.
“They came to us in a large way,” he added. “There’s already been some investment in IT and systems that would be required, so I think that shows they’re very committed to this process.”
If adopted, Alberta’s credit unions and ATB Financial could develop products similar to models used by private lenders, which offer alternatives to traditional mortgages.
One model involves the bank buying a property on behalf of the client, who then makes fixed monthly payments that include a profit margin until the home is fully paid off. Another approach allows the client and institution to become co-owners, with the client gradually buying out the bank’s share.
Although ATB Financial said it’s open to offering halal mortgages, the bank stated that consultations would be needed before implementing such a product.
"ATB Financial is committed to understanding the diverse needs of our clients, including those seeking halal financing options," the bank said in an emailed statement sent to The Canadian Press.
"We recognize the complexities involved in developing such specialized products and are dedicated to actively listening to our clients to ensure any future offerings align with market demand."
Horner noted that if credit unions and ATB Financial choose to offer these alternative financing options, they would be accessible to all Albertans, regardless of religious background.
Sharif Haji, the Opposition NDP's shadow minister for affordability and utilities, said the legislation appears to be a positive first step but raised concerns about whether the UCP conducted a sufficient consultation on the changes.
"What I'm hearing from the communities is that they haven't been consulted, whether it is faith-based institutions or whether it is individuals and experts that have been working, developing, and have knowledge around the products like this," Haji said.
Aside from halal mortgages, the omnibus bill tabled by Horner also proposed changes to unrelated areas. It would pave the way for a new $200 annual tax on electric vehicles and adjust how funding for social benefit programs, such as Assured Income for the Severely Handicapped (AISH), is calculated.
Read more: Halal mortgages: Executive on niche's growth potential in Canada
Future funding increases for AISH would default to the lower of either 2% or the inflation rate, although this figure could be adjusted annually.
This change seeks to standardize funding calculations across social programs, aiming for consistency.
“This is just the default,” Horner clarified. “It has to be looked at every year (and) if no decision is made, this is the default that applies.”
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