As Muslims continue to grow, as a percentage of the population in the United States, it is only expected that like-minded business and commercial enterprises will multiply to accommodate this expanding market. A primary example of this phenomenon is in the real estate finance sector.
Since Halal practices are important to so many, these lenders market their compliance with Sharia law along with superior customer service. The UIF (University Islamic Financial) Corporation is a major contestant for this pool of consumers. Under consideration here is:
- How well does UIF conform to religious standards?
- What is the UIF business model and what are its products?
- What are customers saying about their UIF experiences?
History of UIF
UIF is actually a subsidiary of University Bancorp, a financial institution which saw the need for tailoring its products to the Islamic community and to others who are morally prohibited from paying or receiving interest.
Originally chartered in 1890 as Newberry State Bank in Michigan’s Upper Peninsula, the holding company assumed control in 1988. The name was changed to University Bank in 1994, and its headquarters was subsequently transferred to Ann Arbor. In doing so, the bank was situated in a much more diverse locale.
The story behind UIF is documented by the New York Times and national Public Radio, among other media outlets. Responding to the many potential customers who view interest in opposition to religious principle, University Bank initiated a line of financial service products for Muslims in 2003 under what would become the UIF component.
Today, UIF alone does business in 26 states, maintaining offices in eight. Its stated mission is to attend to the financial needs of the Islamic community in the U.S.
How Does UIF Maintain Halal Business Practices?
As with other Sharia-conforming finance companies, UIF submits to the supervision of experts in Halal finance. Its independent Sharia Supervisory Board consists of:
1. Sheikh Nizam Yaquby – is the chair of the supervisory board. Having served on dozens of Sharia boards, including Shamil Bank of Bahrain B.s.c. and the Abu Dhabi Islamic Bank, he brings years of experience and academic training to the task. With a doctorate in Islamic finance from the University of Wales, Sheikh Nizam Yaquby regularly consults government regulatory bodies the world over on the subtleties and particulars of Islamic banking.
2. Abdulbari Mashal – holds a Ph.D. in Islamic Economics from the Shariah College at Al-Imam Islamic University, Riyadh, KSA. In addition to working with an array of supervisory boards and arbitration panels, Dr. Mashal is a prolific author of textbooks, journal articles and pieces for the popular press. He has also advised the United States Chamber of Commerce.
3. Mufti Abdullah Ebrahim Nana – is a scholar in Islamic jurisprudence and actively serves as an Imam at the Islamic center in Mill Valley, California. He also instructs students in Arabic and Islamic sciences at schools in San Francisco. With a business degree from the University of California at Berkeley, Mufti Nana spent seven years in post-graduate study in South Africa. He maintains an active speaking schedule at universities and other venues across the United States.
Under the supervision of these scholars, UIF transacts a variety of financial undertakings that avoids interest, or riba, while providing for its own maintenance and earnings. Furthermore, since 2007, this company retains membership in the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI).
This association articulates Sharia standards regarding, accounting, management and auditing for Islamic financial entities. With this goal in mind, AAOIFI presents continuing education and certification programs in different areas of Islamic finance.
Membership in AAOIFI indicates that UIF’s Sharia supervisors meet with the organization’s approval. Beyond this, AAOIFI reviews financial statements, articles of incorporation, CEO profile and other organizational relationships – in UIF’s case, its place within University Bancorp, for example.
Once approved for membership, the financial institution is obliged to adhere to AAOIFI accounting and auditing standards as well as its code of ethics. Continued affiliation is conditioned on such conformity.
These resources and safeguards notwithstanding, the Assembly of Muslim Jurists of America (AMJA) has cited UIF, along with other companies that market themselves as halal, for offering purchase contracts that sometimes withhold justice from customers.
The judgment states that such agreements may be acceptable acute and urgent circumstances, but not as a standard practice. More on this below. Important to note is that the AMJA conclusions apply to UIF’s residential purchase program. Dealings related to commercial properties and vehicle financing are not a subject of the AMJA resolution.
As noted, UIF is not the only Muslim-oriented lender to fall under the AMJA’s critical eye. Faithful believers doubtless wish to enter into contracts that are halal and do not challenge the conscience. At the same time, they can recognize that even experts do not always concur on complex matters of religious law and financial affairs.
UIF Products and Business Practices
UIF helps customers to afford existing residences, new construction, commercial/investment properties and motor vehicles.
Home Financing
As with other halal financiers, UIF adopts the Musharaka arrangement with customers, whereby both parties share in gains and risks. The customer advances its share of the capital in what is understood in common mortgage parlance as a down payment. Correspondingly, UIF contributes the remainder of funds – again, looked upon with standard mortgage lenses as a loan amount. Important to observe is that both parties to this transaction are engaged in a rent-to-own design.
Since the customer assumes exclusive residency of the purchased property, the financing partner – UIF, that is – charges monthly rent to the resident. As the customer forwards the monies to cover occupancy and to buy out UIF’s ownership shares, majority shareholding status passes from UIF to the occupant. This does not relieve the customer of remaining obligations but it does increase the percentage of buyout within the monthly remittance while decreasing the proportion of rent.
Contract terms can endure for 10, 15, 20 or 30 years. When the customers complete the payment schedule, they assume sole ownership of the house. This principle applies to purchase financing or refinance contracts. Under the latter regime, a home owner yields a portion of holdings to UIF in order to either lower the monthly payment or to receive a financial outlay to be paid back. Given the fact that customers enter into ownership agreements with an LLC, UIF is careful to stress that there are no LLC fees charged.
In contrast with traditional American mortgage lending, Musharaka ideally distributes the burden equitably between financier and recipient.
STANDARD MORTGAGE: Borrower down payment –> lender financing –> borrower sole ownership –> increasing equity –> foreclosure if default –>equity lost
MUSHARAKA: Buyer share/refinance share –> UIF financing co-ownership –> diminishing Musharaka/buyer rents to own –> default leads to eviction but buyer can recover some funds if successor is found.
One of the AMJA’s objections to the lender’s execution of Musharaka residential contracts is that, in the case of UIF and others, failure to keep up payments not only leads to eviction of the occupants, but also subjects the customer to continued collection efforts until another is found to assume residency. Moreover, these arrangements, per AMJA, give the finance company an unfair advantage relative to the costs and benefits of homeowner insurance, violating the Musharaka value of shared risk.
Commercial Financing
UIF offers financing for a broad range of non-residential real estate. Among the properties the company underwrites are office buildings and retail outlets; mosques and other religious buildings; apartments and other multi-family dwellings; educational buildings and other common spaces. As with residences, UIF operates on Musharaka concerning income-generating properties as well. As before, the customer puts in a share and UIF makes up the difference in property value. The length, or term, of the rent-to-own agreement is worked out between the parties.
Under the umbrella designation of commercial financing, UIF utilizes two separate rubrics – one for strictly commercial landholdings and another for properties acquired by non-profit organizations. For the former, eligible customers must demonstrate the ability to put up 35 to 40 percent of a sales price as down payment. Rounding out the approval criteria: business and personal financial statements; evidence of due diligence; and sufficient collateral are also necessary for consideration for financing.
Non-profit entities should first demonstrate 501(c)3 status. In addition, like their for-profit counterparts, non-profits must provide 35 to 40 percent of the property value and three years of financial statements. Due diligence and acceptable collateral are likewise expected. Uniquely, non-profit organizations must be supported by three individual guarantors, each of whom must be approved. The financial nature of charitable and community-focused enterprises necessitates this sort of personal assurances.
Construction Financing
UIF regularly helps Muslims and others acquire existing homes. Yet it does not confine itself to these dwellings. New home construction – and additions to standing houses – also benefits from the company’s financing. Under UIF guidelines, customers are responsible for purchasing the raw land, which they must own without any liens, judgments or debts attached. With the property in hand, the customer can apply for construction financing. In so doing, they are essentially applying to be an agent of the finance company.
Why?
At this point the customer will select and submit a builder for UIF approval. Subsequently, this land owner will negotiate a building contract. Things differ from the Musharaka home financing in that the profit payment, i.e. rent, is calculated only on what is disbursed to the builder at any given time. Thus, the payments do not amortize in a consistent manner while building is ongoing. Related to this unique feature is the occurrence of double closings – one settlement for the receipt of construction funds and a second when the construction is done.
Vehicle Financing
In an age of rising inflation, the price tags on cars, trucks and other vehicles are following suit. This means vehicle financing is a service in growing demand. A more recent offering by UIF, this sort of funding is made in accordance with Shariah standards. Customers are assured up front that sellers and dealers need not be approved by the company. Neither are there any preferences for new or used vehicles.
- Terms up to five years are available for financing.
- With a deposit of five to 10 percent of the sales price, customers can be approved for up to $100,000.
- Vehicles can be either brand new or previously owned. The older the automobile, however, the lower the financed amount offered and shorter the term allowed.
Once a customer submits the Vehicle Financing form to UIF, the company will reach out to discuss options. At this point, the customer can select the automobile of choice and work out a price with the dealer or owner. UIF then executes a Joint Purchase Agreement with the buyer. Afterward, contingent on UIF approval, the buyer signs a Motor Vehicle Installment Sales Contract; takes possession of the vehicle; and makes monthly remittances to UIF per contract terms.
A used car manufactured between, say, 2013 and 2017 is eligible for up to $75,000 of financing for a maximum four-year term. On the other hand, a used car that rolled off the assembly line between 2018 and 2022 qualifies for up to $100,000 (for later models) spread over five years. New cars are of course worthy of these same terms.
How does this differ from taking an auto loan from a traditional bank? UIF and other halal financiers purchase the car in their own respective names on behalf of the customers. During the course of the contract, the customer is not only paying to buy the car from UIF, but is also contributing a profit payment for using the vehicle. No interest is charged at any point during the life of the contract.
At the time of writing this review, UIF is only accepting vehicle financing applications in the state of Michigan with plans to spread to many more in the coming quarters.
What Are Customers Saying about UIF?
Like every business with an online presence, UIF features positive, satisfied and effusive testimonials on its website. Before any of them, though, the company highlights its position in relevant rankings. For example, UIF was named number one Islamic Financing Institution in the U.S. for the years 2015, 2016, 2017, 2018 and 2019. This recognition was awarded by Islamic Finance News magazine. In the ensuing years – 2020 and 2021 – UIF was named number one Islamic Real Estate Financier, a category covering institutions the world over.
Islamic Finance News (IFN) is a weekly online journal focused on Shariah-compliant financial markets. Focusing on capital markets, trade finance, regulatory issues as well as real estate, IFN itself garners awards for financial journalism. A good evaluation by IFN is a selling point that UIF does not want prospective customers to miss.
That said, how are the customers themselves reacting to the “five-star customer service” offered by UIF? Reviews highlighted on the UIF website praise the company for the rates on which profit payments are based as well as the attentiveness and patience of the loan officers. Other comments reflected on how the customers felt in control of – as opposed to being carried along by – events.
Birdeye.com
Birdeye.com is a platform that works with businesses to index reviews, conduct surveys, generate prospects and get referrals. Collecting all available reviews, Birdeye places UIF at 4.6 on a scale of 5.0. This placement is likely a welcome development at the offices of UIF. Based on 27 solicited reviews obtained with artificial intelligence, Birdeye calculates its rankings by including another 400+ Google reviews. Interestingly, the sought after reviewers tended toward negative assessments.
Complaints to Birdeye about UIF representatives run counter to those found in Google reviews. They are indicted for rudeness and unavailability. Others protest that UIF is not really halal but instead engages in “gimmicks and fraud.” Still others noted delayed closings. This is not to say that there were no positive comments on Birdeye.com. Yet if the Google reviews were not factored in, the Birdeye rank would be much lower.
Google Reviews
Those reviews submitted to Google were almost universally positive. From help with paperwork to returning phone calls to having answers to complicated questions, UIF representatives receive high marks from reviewers on this platform. These customers are sure that they received the best rates available from which to determine the profit payments. First-time home buyers as well as veteran refinance applicants affirmed UIF’s pledge to “hand-hold” through the entire process.
At the same time, many of these reviews alluded to the same loan officers. These individuals may or may not be asking customers for such references but – in all fairness – willingness to write such reviews is not probable among dissatisfied consumers. Key to understanding Google reviews is that length and keyword prevalence assure priority visibility in this search engine. Many UIF reviewers were generous with the word count.
How to Interpret Reviews
Many prospective home buyers and refinance applicants might simply look at the preponderance of glowing reviews and opt for UIF as their lender of choice. This is entirely rational since the numbers support such confidence. At the same time, however, those poor opinions are sitting out there and some might wonder why. One reason pertains to geography. Reviews often fail to mention where the business is done.
Location, Location, Location
As covered earlier in this review, UIF has nine brick and mortar locations and is licensed in 26 states. Even halal finance is subject to state laws, some of which are more demanding than others in terms of accountability, licensure, disclosure and paperwork. In these places, the finance process can take longer and the regulations can sometimes appear confusing to loan officers. When government penalties loom, lenders take extra time to check and double-check everything.
This is but one reason states have differing rates of mortgage activity (originations, closings etc). This conveys the cold, hard fact that some UIF offices do more business than others and simply get more practice than their colleagues in other parts of the country. As they hone their professional skills with each transaction, those in jurisdictions where business is slower have less opportunity to sharpen their competence and customer service in the same way.
Unforeseen Circumstances
Another reason for the modest number of unhappy reviewers can be anomalies, i.e. out of the ordinary events and conditions that bring disappointment to prospective home owners. The messengers of these bad tidings could be appraisers, lawyers, title companies or home inspectors. They can come in the form of unpaid tax liens against the seller; a dormant sub-surface oil tank violating environmental rules; a job layoff during the approval process; or an illegal extra bedroom created without construction permit. Often, the finance company bears the customer’s displeasure.
True, there are some representatives who roll with these punches better than others. Nevertheless, these are matters beyond the control of a lending agent and have little to do with the customer service operations of the finance company. The ratio of good to bad reviews demonstrates that, if such situations arise, they are few and far between.
Can UIF Be Trusted as Shariah-Compliant when Owned by a Traditional Bank?
It is true that UIF is not a stand-alone finance company like some of its competitors, e.g. Guidance Residential. It is actually the brain child of a non-Muslim Michigan banker who was petitioned by Muslim neighbors to offer Shariah-compliant loan products. So, UIF is a corporate subsidiary of University Bancorp. What does this mean in terms of keeping business halal?
Put simply, a subsidiary is a company that belongs to another company, either in full or in part. This means that the parent company has a controlling interest in the stock of the subsidiary. According to the financial website, Investopedia.com, a parent company will acquire or initiate a subsidiary to achieve a specific financial aim: in the case of UIF, the goal was to expand the customer base.
Therefore, it makes little sense for the holding company, University Bancorp, to encourage or coerce its subsidiary to compromise on Shariah standards since such values are a primary attraction for new customers. Actually, the parent company has a greater interest in Shariah being upheld consistently to gain the confidence of its target market. It is to the benefit of sound business and community relations to assure the religious autonomy at UIF.
Can UIF Compete when Some Scholars Question Its Shariah-Conformity?
The AMJA critique of UIF, Devon Bank and other Muslim finance companies goes to the complex details of Shariah compliance. With its own supervisory board holding impeccable credentials – and membership in the AAOIFI secure – is UIF seriously harmed by the AMJA claims? Neither the supervisory board nor the AAOIFI have publicly questioned the finance company’s business model or individual transactions. Does this disagreement rest in divergent interpretations of the Qu’r’an? Or are other sources at the root of it?
A quick survey of biographies of AMJA Fatwa Committee members reveals that none hold degrees in Islamic finance. This may or may not be significant since some have taught and written on the subject extensively. Still, it begs the question of whether the AMJA is approaching the issue of halal finance as financial scholars would. This is not to cast doubt on their statements; only to explain why differences exist between these jurists and others who are familiar with the subject.
These discrepancies are instructive for home seekers who are shopping for a finance company. One or more will run afoul of one body of scholars or another. Faithful Muslims do well to study the histories and credentials of disputing authorities before deciding on which company to go with.
With Whom Does UIF Share the Islamic Market?
At the end of 2016, the business network CNBC identified the largest Islamic finance companies in terms of available capital. These institutions were lauded for avoiding practices affected by economic bubbles. The top-tier lenders were UIF, American Islamic Finance House and the Harvard Islamic Finance Program. The last of these became an information clearinghouse for Islamic finance and its assets were assumed by JP Morgan Chase.
The American Islamic Finance House is Known as LARIBA and affiliated with the Bank of Whittier in California. Like UIF, LARIBA offers home financing, auto financing and commercial property financing. Its assets for these endeavors amount to $10.6 million. JP Morgan Chase bases its Islamic finance operation in Saudi Arabia though it conducts business all over the world, including the U.S. Standard Chartered bank also does a large business in the States, offering an array of Islamic financial products.
Meanwhile, Guidance Residential, Devon Bank and the Ameen Housing Cooperative compete for the same client pool as UIF Corporation. Each has experienced financial growth over the past few years, perhaps a result of an influx of Muslims through immigration and the tendency of Muslim families to be on the large side.
Islamic Finance and Technology
UIF Corporation presently utilized 22 technology products in its day-to-day operations, according to G2 Stack, a sales and marketing technology website. These products include Google Analytics, jQuery and HTML5. In fact, Islamic fintech is growing exponentially. In general, financial technology has up-ended banking and related industries over the past five years.
In 2020 alone, Islamic fintech accounted for $49 billion worth of sales transactions within the OIC, i.e. the Organization of Islamic Cooperation, a consortium of Muslim states. Cross-border remittance payments, formerly a headache for all concerned, are now becoming easier because of financial technology. Features that can streamline transactions and expedite business only benefit finance companies like UIF Corporation. It is of little surprise that this institution is eager to embrace them.
In so doing, UIF Corporation creates a user-friendly experience for its customers; accelerates the pace of approvals and closings; and encourages greater technological literacy in Islamic communities. While UIF is known for its interest in this area, it remains to be seen whether it will take the lead and gain the technological edge over other halal finance enterprises.
Pros and Cons of Applying to UIF for Financing
PROs:
1. Financially stable with a large pool of bank depositors undergirding its operations.
2. Overwhelmingly approved of and endorsed in online reviews.
3. Future-oriented and customer-centered; always seeks to improve the experience.
4. Holds full membership in large organization of Shariah-based finance companies.
CONS:
1. Questionable practices according to major Shariah council of Imams.
2. A few very bitter reviews which could reflect more widespread discontent.
Should I Do Business with UIF Corporation?
A sober look at reviews of other Islamic financiers will show results similar to those of UIF: large numbers of favorable opinions and a minority of criticisms. It may imply that this particular market segment stays largely silent when there is nothing good to say. By contrast, traditional mortgage borrowers are more prone to protest when disappointed than they are to celebrate when all goes as it should.
Still, the Muslim customer pool takes Shariah seriously and may be willing to put up with some inefficiencies and annoyances in the service of obtaining a halal financial transaction. If online testimonials do reflect reality, bad experiences will be rare. Yet if there is a question of halal authenticity, the observant Muslim may pause before acting.
He may wish to study the profiles of AMJA Fatwa Committee members; review the standards of the AAOIFI; and even contact a representative of UIF to learn more about its Shariah supervisory committee. When it all comes down to interpretation, a prospective customer is well-advised to get a sense of who is doing the interpreting. Just as due diligence is necessary for the finance company, it also helps the client.
UIF has a solid reputation among Muslims. Customers should, nevertheless, decide for themselves.