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VAM-Velferd, arbeid og migrasjon

FINEX: Financial Exclusion, Islamic Finance and Housing in the Nordic Countries

Alternative title: FINEX: Finansiell ekskludering, islamsk finans og bolig i de nordiske landene

Awarded: NOK 8.0 mill.

Project Manager:

Project Number:

270849

Application Type:

Project Period:

2017 - 2021

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Some Muslims believe that certain elements of the modern financial system are incompatible with religious norms. In particular, some interpret the Quranic ban on riba as a ban on interest in the modern sense. Others are of the opinion that the Quranic ban on riba is really about a particular kind of usurious interest practiced in the distant past and that modern finance is indeed compatible with Islam. From the 1970s there have been several initiatives in the Islamic world to establish financial institutions that follow Islamic principles. Some of these initiatives are found among Muslims in the Western world, but so far they have not had great success. In this research project we have investigated whether, how and to what extent Islamic norms about finance cause financial exclusion. In particular, we want to find out if Muslims have lower rates of home ownership in the Nordic countries because of these religious norms. If many Muslims avoid using normal financial services, in particular if they refrain from borrowing money to buy homes, this may have important consequences as it results in economic exclusion and it may also have social consequences, like unstable living conditions. This research project used both quantitative and qualitative methods to investigate aspects of this issue. The findings from the project are many, and since the collected data are so rich, the findings cover a number of different questions. It is impossible to summarize all the findings here, but at the most general level we have confirmed the assumption that some Muslims experience finance as a moral and religious problem and believe that Islam provides clear guidelines on what is right and wrong. Some Muslims avoid taking loans from a bank because they consider it a sin to pay (or get paid) interest on money. At the same time, we must emphasize that many Muslims are indifferent to questions about the relationship between religion, morality and finance. Between these two extremes we find many people who take loans and use other banking services, while at the same time experience this as morally and socially problematic. Some also try to take as little loan as possible, and to repay debts as quickly as possible. We find that among those who completely avoid taking bank loans, a large majority perceive it as a problem that they do not have access to financial services that are consistent with Islam. In many of the articles from the project, we explore experiences with lack of access to finance and its consequences. A typical consequence is that one must rent a home, which is detrimental to people?s private economy because homeownership is often the key to build equity through a lifetime. A fundamental assumption in social research on immigration from Muslim countries is that people generally take up values in their new homeland. However, there is nothing in our data to suggest that the awareness about questions of Islam and finance disappears with longer residence or with higher education. It is also not the case that men and women are fundamentally different about these questions. However, we can see some differences between Muslims according to their country background where Somalis often have a stricter understanding of Islam's ban on interest than do Pakistanis or Bosnians. If we are to make a policy-oriented consideration after several years of fieldwork and interpretation of data, we can say this: The institutions and persons who help shape the markets for finance and housing in the Nordic countries (such as the commercial banks, the Norwegian State Housing Bank, the national financial supervisory authorities, large entrepreneurs and relevant politicians) know little or nothing about these issues, they show no interest in this form of financial exclusion , and they have no understanding that the groups we have studied constitute a large potential customer group.

Firstly, the project has an impact among Muslim organizations and leaders. These communities have increased their knowledge about the actual extent and impact of Islamic financial norms among Muslims in the West. They have also gained understanding of the obstacles and potentials concerning the creation of financial institutions that comply with Islamic norms. Secondly, the project may have an impact among institution in the financial sector. Most banks in the West are not interested in the issues raised by the project, but a handful realize that our results point to a potential market for a new type of financial product. It is possible that this will result in financial innovation. Thirdly, there are outcomes in the international academic community. This is evident in the fact that a new research project about Muslims and finance was funded by the RCN starting 2021. The broader academic impact will manifest in international research initiatives.

The primary objective of FINEX is to show if, how and to what extent Islamic norms about finance works to exclude a substantial number of Muslims from homeownership in the Nordic countries with the important economic consequences such exclusion might have. FINEX will combine several types of data and methods to demonstrate a mechanism of exclusion that has so far only been hinted at in existing research literature. Thus, FINEX will fill a gap in our knowledge about the economic inclusion of migrants, a gap that is becoming increasingly important partly because the Muslim populations of Europe are growing and partly because the issue of Islamic finance is becoming more important to Muslims. FINEX will use four types of data. 1) it will carry out a limited and targeted survey of three selected immigrant groups (Pakistanis, Somalis and Bosnians) across the four Nordic countries, 2) it will use existing register data from the national statisticial bureaus of the Nordic countries, 3) it will use existing data from Norwegian banks, and 4) it will collect qualitative data through interviews and focus groups in the Nordic countries. Workpackages are organized around the types of data to be used. One workpackage is devoted to bringing the data and their analysis and interpretation together in 7-8 academic articles in peer-reviewed journals and a number of more policy-relevant forms of dissemination. FINEX will involve Muslim communities to a very high degree, both in research design and as user groups. It will also involve banks, financial regulators and politicians in debates about results.

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VAM-Velferd, arbeid og migrasjon