Mortgages for the Middle East: Much Work Needs to Be Done before a Vibrant and Fully Functioning Home Mortgage Market Can Take Root in Most Middle Eastern Countries. Egypt and Turkey Are Taking Steps in This Direction

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The introduction of the residential mortgage concept to Middle Eastern countries has been hampered by those followers of Islam who adhere to the strict Shariah law, which forbids the giving or receiving of interest. [??] However, growing populations and an expanding middle class have fostered the need to give more people access to homeownership. As a result, advances in modern banking and mortgage issuance have spread from the Mediterranean Sea to the countries along the Persian Gulf. [??] In addition, a number of "Islamic mortgages" have been unveiled, most of which are based on some form of a lease-to-own concept in which the bank enters into a promise-to-purchase agreement with the buyer: The bank purchases a property, and it then leases the property to the buyer with a portion of payment applied to purchase. [??] More important, two large Middle Eastern countries with the most secular governments--Turkey and Egypt--are currently working diligently with both U.S. development agencies and the Mortgage Bankers Association (MBA) to help create a much-needed mortgage industry.

Middle East mortgage movements

In 2003, Her Majesty Queen Rania of Jordan opened the new headquarters of the Arab Academy for Banking and Financial Services in Amman, Jordan. The school today offers classes and training in array of specialties such as traditional banking, Islamic banking and finance. Students who attend the Arab Academy can earn a bachelor's degree or even a Ph.D.

To round out the academy's offerings, it has signed accords with such groups as the American Bankers Association (ABA) and the Institute of Internal Auditors to hold training programs. In 2006, MBA's Campus MBA will begin a partnership with the academy to train students on the mortgage banking process.

Oddly, the most emphatic push for residential mortgages is emerging from the smaller Persian states. Although the conservative governments here are not divorced from the Islamic religious teachings, these oil-rich states have been transformed into commercial and financial centers.

CampusMBA currently has a proposal in Dubai, United Arab Emirates (UAE), to work with the Realtor[R] company ERA Francise Systems Inc., Parsippany, New Jersey. As the largest Realtor group in the Middle East, it is trying to build a multiple listing service (MLS) system, says Dan Thoms, CampusMBA's vice president of education. "ERA is just getting started, and we are trying to support mortgage development. I expect we will be doing training in the country," he says.

Meanwhile, a number of Persian Gulf banks have absorbed Western banking practices, which they are now exporting to other Middle Eastern countries.

In 2005, www.ameinfo.com, a Middle East business Web site, made this curious observation about Sheikh Zayed Road in Dubai: "Drive along and you cannot fail to see the longest-ever billboard advertising Abu Dhabi Commercial Bank's bank entry into the mortgage market ... the first sign of an explosion in mortgage offerings to come."

Qatar's Doha Bank, as part of its cross-border services, launched in 2005 what it calls the "BOB Housing Scheme," in conjunction with the Bank of Beirut (BOB) in Lebanon.

According to Doha Bank, the first-of-its-kind mortgage program between it and the Bank of Beirut will provide Qatar investors the opportunity to purchase homes in Lebanon, financed by the Bank of Beirut. In effect, the Bank of Beirut will outsource the services--account opening, direct debit and administrative handling--to Doha Bank.

While Doha Bank and Abu Dhabi Commercial are certainly at the forefront of a Middle Eastern mortgage movement, these are individual efforts. What countries like Egypt and Turkey are attempting is a full, national unveiling of a mortgage system.

While both countries are at the infancy stage of this undertaking, Turkey has a clearer grasp of what needs to be accomplished, with the government poised to introduce legislation to unravel thorny impediments. …