Myth or fact: Sharia approval

Ten statements about who approves Islamic home finance, what a Sharia certificate covers, what FCA regulation does and does not mean, and where scholars differ. Pick myth or fact. Every answer comes with its source, from our guide to whether Islamic mortgages are halal, which reports positions and does not rule on them. Neither does this quiz.

Three questions, kept apart

What the contract does: scholars judge the contract, not the name. The International Islamic Fiqh Academy allows diminishing musharaka subject to conditions in Resolution 136 (2/15), and separates lease-to-own forms in Resolution 110 (4/12).
Who approved it: each provider’s own Sharia board or advisory firm, assessing a set of documents on a date. FCA regulation is a separate matter and says nothing about Sharia.
Where scholars differ: not on whether riba is forbidden, but on what modern products do with it. In one published review of eight companies in the United States, two contracts with the same structure did not get the same answer; that review examined no UK provider.

If permissibility decides it for you, the halal guide lists the questions to ask a provider, and suggests weighing the answers with a scholar you trust. Who certified each mainstream UK product is set out on are Islamic mortgages halal.

See all ten, with the answers

If a home finance product is regulated by the FCA, it has been approved as Sharia-compliant. Myth. Regulation and Sharia approval are separate. The FCA’s guidance says nothing in the home purchase plan definition limits it to arrangements designed to comply with Islamic principles. Regulation is about your protections; Sharia approval is assessed by scholars. Source: are Islamic mortgages halal, regulated is not certified
A home purchase plan is a legal category, not a religious one. Fact. The category is defined in law by who buys the property, who must buy it back and who lives in it. Nothing in that test refers to Sharia. Whether a given product is Sharia-compliant is a question for the provider’s own scholars. Source: what a home purchase plan is
One central Sharia authority approves every Islamic home finance product in the UK. Myth. Each provider has its own Sharia board, or an advisory firm, review its contracts. A certificate is that body’s assessment of a set of documents on a date: not a consensus, and not a ruling by us. Source: are Islamic mortgages halal, who certified what
Two products can share a Sharia certifier and still be different contracts. Fact. A shared certifier is not a shared contract. Each certificate assesses one product’s documents, and two certificates from one organisation are two products assessed by one body, not two independent positions. Source: are Islamic mortgages halal, who certified what
A Sharia certificate guarantees how the contracts are run after you sign. Myth. A certificate is a finding about documents on a date, not a warranty about how they are operated afterwards. One UK certifier says so in the certificate itself: its approval covers the reviewed documents and processes only, and putting them into practice correctly is down to the parties. Source: are Islamic mortgages halal, structure is not implementation
The International Islamic Fiqh Academy allows diminishing musharaka only subject to conditions. Fact. In Resolution 136 (2/15) it is permissible subject to conditions, including that insurance and maintenance are charged by ownership share, that profit is a percentage rather than a lump sum, and that the contracts are kept independent of each other. We report the conditions; whether a product meets them is for its certifier and for scholars. Source: are Islamic mortgages halal, what the standards require
The Fiqh Academy accepts every lease-to-own arrangement as one category. Myth. Resolution 110 (4/12) separates permissible forms from prohibited ones. A lease contract that automatically becomes a sale is on the prohibited list; a lease and a sale kept as separate, independent contracts are among the permitted forms. So the contract details matter. Source: are Islamic mortgages halal, what the standards require
Scholars disagree about whether riba is forbidden at all. Myth. The ban on riba itself is not in dispute among the schools. The debate is about what modern products do with it. Source: what is riba, where scholars differ
Some scholars argue that a contract which copies a loan’s economics is a loan by another name. Fact. Some scholars do argue that. The standards bodies answer that the contract is what counts, and that pricing a sale or a lease against a market rate does not turn it into a loan. We report both positions and do not rule between them. Source: what is riba, where scholars differ
Standards bodies have been more critical of the organised tawarruq banks use than of the classical form. Fact. Standards bodies have accepted classical tawarruq between unconnected parties, and have been more critical of the organised form, where the bank arranges both legs of the commodity trade. Providers using it hold their own Sharia approval. Source: what is riba, commodity murabaha

Independent research, not financial advice. This quiz describes what standards bodies, certifiers and scholars have published; it does not say whether any product is permissible.

More games

Spot the structureTen descriptions of a deal. Diminishing musharaka, ijara or murabaha?
Guess the splitHow one home purchase plan payment divides between rent and buying your share, year by year.
Who owns what?At each moment of a deal, who owns the home, and which rules cover it.