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A Vermont credit union is developing what would be the state's first lending program that complies with Islamic law, aiming to help more Muslim households buy homes.

Islamic law, or Shariah, prohibits the collection and payment of interest by lenders and investors, which means many existing loans, including mortgages, don't comply. In general, relationships that favor the lender are prohibited, or considered haram.

Financing models that do comply with Islamic law include arrangements where a bank buys property for a customer and leases it back, or where a bank and customer jointly purchase property and agree to share in the profits and losses.

Timothy Carpenter, a senior lending manager at Opportunities Credit Union, which is developing the framework, said the organization hasn't worked out all the details but is looking to create a model where it and its customers share ownership of a home.

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