protorayish
New member
@xososaxo The goal is to encourage participation instead of lending, which is considered profiteering and unethical. If a "lender" finances a harvest, it will get more return in good years and less return in bad years. Problem with a home is that except for changes in valuation there is no return, the benefit provided (shelter) is all consumed by the homeowner.
Imagine if home mortgages for the purpose of buying a home would be forbidden in Canada. You can still take a mortgage for the purpose of starting a business (production), but not for the purpose of buying a home (consumption).
On average, about 3/4 of each and every Canadian home is owned by the homeowner and 1/4 is financed by a lender. If you take the lender out of the equation, market dictates that the lower amount of money would be used to hold the same amount of real property and that prices would go down 25% across the board, immediately. In the real world, nothing would change. Canadians would still live in their home. In the financial world, Canadians would have more disposable income and be wasting less money on what is practically consumer credit. The residential mortgage lending industry would collapse. Job losses, bank profitability down.
Now think of it the other way around: let mortgage lender pump money into the hand of consumers who then compete for the same real estate with much more money.
Market dictates that more money will be used to hold the same amount of real property and prices will go up. until someone breaks. In the real world, little would change. Canadians would still live in their home. In the financial world, Canadians would have less disposable income and be wasting more money. Mortgage companies would be more profitable.
You may agree or disagree with the Islamic view of reining in lending. It is just one way that an organized society has found to keep at bay human greed in the context of an unbalanced relationship (lender-borrower). You have to step out of the box in which we are living to understanding it.
Imagine if home mortgages for the purpose of buying a home would be forbidden in Canada. You can still take a mortgage for the purpose of starting a business (production), but not for the purpose of buying a home (consumption).
On average, about 3/4 of each and every Canadian home is owned by the homeowner and 1/4 is financed by a lender. If you take the lender out of the equation, market dictates that the lower amount of money would be used to hold the same amount of real property and that prices would go down 25% across the board, immediately. In the real world, nothing would change. Canadians would still live in their home. In the financial world, Canadians would have more disposable income and be wasting less money on what is practically consumer credit. The residential mortgage lending industry would collapse. Job losses, bank profitability down.
Now think of it the other way around: let mortgage lender pump money into the hand of consumers who then compete for the same real estate with much more money.
Market dictates that more money will be used to hold the same amount of real property and prices will go up. until someone breaks. In the real world, little would change. Canadians would still live in their home. In the financial world, Canadians would have less disposable income and be wasting more money. Mortgage companies would be more profitable.
You may agree or disagree with the Islamic view of reining in lending. It is just one way that an organized society has found to keep at bay human greed in the context of an unbalanced relationship (lender-borrower). You have to step out of the box in which we are living to understanding it.