By Suzi Morales
innovation
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Photograph by Adobe stock
winter 2023
Muslim-owned small businesses face a major challenge. Most lenders require interest payments on loans, but such interest payments are prohibited under Islamic canonical law, which is based on the teachings of the Quran and known as Sharia.
Suffolk Law’s Transactional Clinic students have come up with a solution. With the Riyadh, Saudi Arabia office of global law firm Ashurst, the clinic has strategized and prepared Sharia-compliant loan documents to help area nonprofit African Community Economic Development of New England (ACEDONE) establish a loan program.
With the clinic’s support, ACEDONE now has a system in place for providing nano-loans of less than $5,000 to small businesses owned by African refugees, many of whom are Muslim. The unique loan program is one of only a few in the United States, according to Professor Carlos Teuscher, founder and director of the clinic.
In Arabic, the loan structure is called a murabaha. Instead of charging interest, a bank buys an asset and then sells the asset back to the client with a profit charge. Muslim-owned businesses can use this type of financing when purchasing machinery, equipment, or raw materials.
Working in the clinic has given students a valuable professional experience, while making a difference for innumerable clients going forward. ACEDONE hopes to make the loans widely available to small businesses in the region.
