entity/bank keep the servicing in house, with the work done by commu-
nity members. This practice helps the customers if a problem occurs,
especially in cases when the customer loses his/her job or is temporarily
disabled. The concept of mercifulness (tarahum) is applied. The cus-
tomer is turned over to a nonprofit assistance organization to help meet
the needs of the family until the problem is resolved.THE RESULTS
The most important feature of the Shari’aa-based RF finance discipline and
principles is that the investment decision is based on the actual market rates
of rent of the property or the business, as measured by both the customer
and the finance officer. The process does not take the rental rate of
money—riba—and calculates the monthly payment. Because the process of
buying a home, a car, a business, or a service is looked upon as an invest-
ment that must be prudent, not just as a buying exercise that obtains money
by incurring debt at an interest rate. In this regard, the RF finance company/
bank considers itself as an implicit co-investor in the activity as implied by
the application of the lien.
That is why investing according to the Shari’aa-based LARIBA RF fi-
nance model has had superior results compared with the results experienced
by conventional riba-based banks and other ‘‘Islamic’’ finance organiza-
tions that use the Shari’aa-compliant model. This success is because the RF
banks rely on evaluating the prudence of the investment. It is clear that due
to using the LARIBA Shari’aa-based RF finance model, delinquencies are
essentially nonexistent—almost 1 in a 1000—compared to a delinquency
rate as high as 10 percent—100 in a 1000—in some cases, as experienced
by riba-based banks and financial institutions.
One day, after the revelations of the economic meltdown of 2008 and
the subprime mortgage debacle, we received a call from the assistant editor
of a major U.S. news magazine.^20 She had been following our progress since
her first interview with LARIBA in 2002. She asked about our portfolio per-
formance and how we were doing in the difficult market conditions. We
told her that we are doing very well, and we shared with her the fact that
LARIBA mortgage portfolio delinquencies are a small fraction of the na-
tional average.
Fannie Mae representatives were impressed by the performance of the
home mortgage portfolio underwritten using the RF LARIBA Shari’aa-
based model and process. Fannie Maeanalysts explained to us that our
portfolio is among the top ten performing portfolios in the Western region
of the United States. We told them that the reason for our success is our
276 THE ART OF ISLAMIC BANKING AND FINANCE