In the name of God, the compassionate the merciful
Sukuk, which are Islamic financial instruments similar to bonds, can be utilized to mitigate housing troubles in several ways. Access to decent housing is a fundamental human right across sub-Saharan Africa and the rest of the world. However, this right remains an elusive dream for many households. For example, the government estimates a staggering deficit of 1.8 million homes in Ghana in 2023. Islamic finance may be the panacea for this chronic human rights problem in our country Ghana. Several Islamic finance instruments through the sukuk mode of financing are available to be utilized by the Republic of Ghana’s Ministry of Works and Housing. They are as follows:
Firstly, Islamic Mortgages: Sukuk can be structured to provide financing for individuals or families to purchase homes in compliance with Islamic law (Sharia). This is not only available to individuals who adhere to Islamic principles but also to individuals who are not Muslims to own homes without resorting to traditional interest-based mortgages, which are exorbitant in price and prohibited in Islam.
Secondly, Affordable Housing Projects: Governments or private entities can issue Sukuk to raise funds for affordable housing projects. These projects can focus on providing housing for low-income individuals or families who might otherwise struggle to afford suitable accommodation. Sukuk holders would receive returns from rental income or sales proceeds of the housing units, making it an attractive investment while addressing housing shortages.
Thirdly, Social Housing Initiatives: Sukuk can also be utilized to finance social housing initiatives, where governments or organizations provide subsidized or low-cost housing options to vulnerable populations. Sukuk investors can earn returns from rental income or government subsidies, while the housing needs of the less fortunate are addressed.
Moreover, Real Estate Investment Trusts (REITs): Sukuk can be issued to fund Islamic Real Estate Investment Trusts (REITs), which invest in income-generating real estate assets such as residential properties. This allows investors to pool their funds to acquire a diversified portfolio of properties, including residential units while adhering to Islamic principles.
In addition, Green Sukuk for Sustainable Housing: Green Sukuk can be issued to finance environmentally sustainable housing projects. These projects not only address housing shortages but also promote eco-friendly construction practices, energy efficiency, and sustainability. Investors in Green Sukuk earn returns from environmentally friendly housing developments, contributing to both social and environmental objectives.
Last but not least, Islamic Microfinance for Housing: Sukuk can be utilized to support Islamic microfinance initiatives focused on housing. These initiatives provide small-scale financing to individuals or families to build, repair, or improve their homes. Sukuk proceeds can be channelled into microfinance institutions that specialize in Islamic housing finance, enabling access to housing for underserved communities.
By employing Sukuk strategically, housing problems can be mitigated effectively while adhering to Islamic financial principles and attracting investment from individuals and institutions seeking Sharia-compliant opportunities. And Allah knows best. “Praise be to Allah in whose favour good deeds are accomplished” (ibn Majah 3803)
YAHAYA ILIASU MUSTAPHA
The writer is an Islamic Banking and Finance patron and advocate in Ghana and beyond.
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