University Bank of Ann Arbor launched rent-to-own commercial financing this year as part of its growing Muslim lending platform, with plans to lend up to $1.3 million for a commercial project.
"We expect that we will have a lot of businesses interested in the commercial side," said Amjad Quadri, assistant vice president of development and new markets. "It's something Muslims have been interested in for a long time. There are a lot of entrepreneurs."
The bank's division for Muslim financing - which follows specific Islamic law on lending and paying interest - has allowed University Bank to offset the slump in the national housing market.
Known as Sharia financing, the Ann Arbor-based bank has a line of products that appeal to Muslim families.
The bank will buy a home, place it in a trust, and then complete a rent-to-own transaction. University Bank also provides savings accounts and CDs for Muslim clients, although they are not guaranteed a certain rate of return.
Sharia financing is arranged through a subsidiary of the bank called University Islamic Financial. Muslim families throughout Michigan and states such as New York, Texas and Illinois seek the bank's unusual products, Quadri said.
"We've never been busier," said Stephen Ranzini, University Bank chairman. "It's really almost too busy right now."
About 36 percent of the bank's business is Sharia financing, including residential and commercial lending, he said, while 28 percent of the bank's deposits are Islamic.
Part of the reason the bank is so busy is because there are so few financial institutions in the country that provide the service, Quadri said.
Another business advantage to Sharia financing is that Muslim families tend to put large deposits on their homes, which makes them less likely to default.
"We're seeing people come in with huge down payments," Ranzini said. "They've been saving for years. Now they can buy a home."