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FRED DE SAM LAZARO: Emran and Israt Gazi are an immigrant success story. He is a petroleum engineer who owns a successful business. She is a physician hoping soon to begin a residency. And they now live in their dream home.
ISRAT GAZI: It is a four-bedroom house; it has two living areas and the master bedroom is downstairs and three bedrooms upstairs.
DE SAM LAZARO: However, it took almost 10 years of scraping by in rented apartments before the Houston couple and their three children were able to move in. It wasn't that the Gazis had bad credit. They simply don't believe it's right to pay interest. Their credit card bills are paid in full each month.
The Gazis, originally from Bangladesh, are devout Muslims. He is president of their mosque council, and has always adhered strictly to the Koran's prohibition on "riba" -- the receipt or payment of interest. It was at the mosque that the Gazis learned about MSI, a Houston lending cooperative that specializes in so-called Islamic financing.
EMRAN GAZI: This is like rent to own, you know; I pay same rent, except difference is I paid 25 percent down first. Slowly I am getting more ownership.
DE SAM LAZARO: Although there are variations in the details, MSI's is a typical model for Islamic financing: borrowers usually make a down payment of 20 to 25 percent. For its part, the bank becomes a joint buyer of the home. But the monthly payments are not pegged to an interest rate, as in a mortgage. Instead they are based on the home's rental value, calculated through a market survey of similar homes for rent.
Professor MAHMOUD EL GAMAL (Islamic Economics, Rice University): Say if the house we're talking about rents for $1,000 a month and you own 80 percent of it, then I have to pay you $800 in rental and then maybe I can pay you $850, where the $50 is the reduction of the total amount that you own in the house.
AYUB BADAT (MSI Financial Services): So the next year when he will send the payments, then his share will go up and our share will go down. Eventually in 10 to 15 years, he will be the owner of the house.
Professor EL GAMAL: Basically you've taken out the interest payment part and replaced it with the rent part.
DE SAM LAZARO: What's the difference?
Professor EL GAMAL: That is the obvious question, the best question. It may seem that all we've done is take out the word "interest" and put "rent" in its place. The difference is how you decide on that rent.
ISRAT GAZI: It is a four-bedroom house; it has two living areas and the master bedroom is downstairs and three bedrooms upstairs.
DE SAM LAZARO: However, it took almost 10 years of scraping by in rented apartments before the Houston couple and their three children were able to move in. It wasn't that the Gazis had bad credit. They simply don't believe it's right to pay interest. Their credit card bills are paid in full each month.
The Gazis, originally from Bangladesh, are devout Muslims. He is president of their mosque council, and has always adhered strictly to the Koran's prohibition on "riba" -- the receipt or payment of interest. It was at the mosque that the Gazis learned about MSI, a Houston lending cooperative that specializes in so-called Islamic financing.
EMRAN GAZI: This is like rent to own, you know; I pay same rent, except difference is I paid 25 percent down first. Slowly I am getting more ownership.
DE SAM LAZARO: Although there are variations in the details, MSI's is a typical model for Islamic financing: borrowers usually make a down payment of 20 to 25 percent. For its part, the bank becomes a joint buyer of the home. But the monthly payments are not pegged to an interest rate, as in a mortgage. Instead they are based on the home's rental value, calculated through a market survey of similar homes for rent.
Professor MAHMOUD EL GAMAL (Islamic Economics, Rice University): Say if the house we're talking about rents for $1,000 a month and you own 80 percent of it, then I have to pay you $800 in rental and then maybe I can pay you $850, where the $50 is the reduction of the total amount that you own in the house.
AYUB BADAT (MSI Financial Services): So the next year when he will send the payments, then his share will go up and our share will go down. Eventually in 10 to 15 years, he will be the owner of the house.
Professor EL GAMAL: Basically you've taken out the interest payment part and replaced it with the rent part.
DE SAM LAZARO: What's the difference?
Professor EL GAMAL: That is the obvious question, the best question. It may seem that all we've done is take out the word "interest" and put "rent" in its place. The difference is how you decide on that rent.
Mr. BADAT: The other major, major difference is we also share the taxes.
Another important factor is if some major thing happens to the house. 
DE SAM LAZARO: Ultimately, Islamic financing spreads risk evenly between
borrower and lender. For RELIGION & ETHICS NEWSWEEKLY, this is Fred de Sam
Lazaro in Houston.
