Avoiding interest payments a challenge for observant Muslims

Options exist, but can be hard to find and confusing

By Zoe Ligairi and Asira Abuageel

January 26, 2026

Youthcast Media Group®

When Abdallah Sulaiman, a Muslim immigrant, set out to buy his first home in America, he was determined to avoid riba – the Islamic term for interest, which is strictly prohibited in Islamic law, or Sharia. After exploring Islamic financing options, he felt skeptical.

“It just didn't feel Islamic,” said Sulaiman, 53, of Tampa Bay. No matter how the banks disguised it, it still felt like “another way to collect interest,” he said. Sulaiman eventually chose a conventional mortgage and paid it off within five years to minimize interest. 

Abdallah Sulaiman (courtesy of Sulaiman).

Sulaiman isn’t alone in his skepticism. His experience reflects an issue within Muslim American communities: the Islamic ruling against riba is often ignored due to a lack of alternatives or because existing banks are perceived as untrustworthy. There are an estimated 25-45 Islamic financial institutions in the U.S., up from only a handful in the 1990’s. But with about 3.45 million Muslim Americans in the country, that still leaves those who wish to follow Sharia’s moral code with fewer than half the banking options of other Americans per capita.

That can make knowing where to start, or who to trust, more difficult.  

Homebuyers usually apply to a bank for a mortgage when purchasing a home, which means they take out a loan for the full cost of the house (principal). They pay the bank both the principal plus a percentage-based interest over the term of the loan, which is usually 15 or 30 years.

While riba-based financing specifics can vary per organization, the general model, called musharaka, or risk-sharing, creates a joint venture between a homeowner and a financing company to purchase a home. This means that the financier and homeowner both share risks, costs and profit. In order to make this work, the financier first purchases the property at market value and rents it out to the future homeowner at a higher, agreed-upon, price until they own the home. This method allows for the financier to both make a profit while the homeowner participates in a trade, rather than a loan.

“For [homeowners], co-ownership isn’t just a financial choice—it’s a spiritual one. They’re often deeply relieved to find a halal option that aligns with their values,” said Abeer Ali, co-founder and CEO of Neeyah, an Islamic financial institution.

Is this model really halal, or lawful, though? Personal practices and opinions within Islamic communities vary. Some, like Sulaiman, feel that there is not one “straight answer” to how Islamic banking should function. This lack of black and white guidelines within the Islamic community makes him and others feel conflicted about their options regardless of which institution they finance with, he said.

Many Muslims resort to participating in alternative financing methods. 

Sulaiman remembers from his time growing up in the Middle East that families would buy properties fully in cash, lending each other money without interest and selling land to get extra money instead of a loan in order to avoid riba. 

Tasnim Chowdhury, an ethnically Bangladeshi Muslim and dental assistant in the Northern Virginia area, highlighted the same practice within her community in the U.S.: “I've borrowed money from friends and family and I've never been charged when borrowing from them. [I have also loaned to] friends and family. I've never charged them interest and I would only lend what was within my means,” she said.

However, this option may not be realistic for all, especially for those who do not have stable financial situations or lack the financial support they had in their home country.

Even in the Middle East, many Sharia-compliant Muslims struggle to find truly halal financing options due to Islamic financing institutions labeling themselves as “riba-free” while they still participate in haram, or forbidden, financing practices. 

In the U.S., Chowdhury and other Muslims in her life have found it hard to avoid riba altogether. So, they participate in both halal financing when possible and conventional banking otherwise, she said.

Tasnim Chowdhury (courtesy of Chowdhury).

“[Paying interest] is just something that we know we have to do—we don't really have any choice of going around it,” she said. “Buying a car [without a loan] is a little bit more manageable, whereas a house is not necessarily as manageable, so you have to kind of pay interest.”

Additionally, some Muslims have engaged in haram banking practices due to being unaware of the option of Islamic finance institutions when they needed money.

“We would say there are enough Muslims who want to stay away from riba, but most of them find it hard to be 100% riba-free,” said Aftab Butt, a member of the Board of Directors for Crescent Co-Op, an Islamic financial institution. “Mostly, people realize a bit late how serious the issue is and by that time they have accumulated some loans that involve riba, making it hard for them to get out of it. Still, most people would definitely opt for a riba-free way of life, if they have options through institutions like Crescent.”

However, Ali from Neeyah acknowledges that not all Islamic financing options offer true alternatives. 

“We saw that many so-called Islamic mortgage alternatives were just rebranded conventional loans—more focused on fitting into existing frameworks than staying true to Islamic values,” he said. Neeyah's practice, he argued, is “not a workaround for mortgages, [but] a fundamentally different model designed from the ground up to be halal.” 

Neeyah charges no interest and shares in the costs of owning a home. Homeowners can gain principal through flexible payments, the company says.

Aside from debates over whether such institutions offer truly halal financing, there is the issue of access. Not many of these institutions exist and those that do, in areas with greater Muslim populations such as in California, New York and New Jersey, face challenges in publicizing what is unique about their offerings. 

Institutions such as Neeyah know that transparency is key to establishing trust around halal financing options:

“We clearly explain our structure, publish educational material, and work with qualified Shariah advisors who review and approve our model. We welcome scrutiny—that’s what helps build confidence in what we do,” Ali said. 

While institutions may provide a clear explanation of their riba-free financial model, some individuals remain skeptical of their intentions.

Choosing whether or not to finance with an Islamic institution “all depends on the term and how [their model is] being presented. I'm not saying they're bad or intentional, but at the end of the day, everyone wants to make a buck,” Sulaiman said.

Zoe Ligairi is a senior and Sasha Barnett is a freshman at Annandale High School, one of Youthcast Media Group’s journalism class partners. They worked with YMG mentor-editor John Waggoner on this story. Asira Abuageel, a freshman at the College of William & Mary and recent graduate of Chantilly High School, contributed to this story.