Nagham Rikan has accomplished what the vast majority of Maine’s more than 10,000 Muslim immigrants and refugees have been unable to do. She started her own business in 2012 despite being unable to borrow money from a bank because of her religion.

Rikan, an Iraqi refugee whose family owns Babylon restaurant in Portland, said the rules of Islam prohibit its members from borrowing money with interest, a principle established in the religion’s early days when usury was rampant and borrowers often were left mired in unpayable debt. Although many states with large Muslim populations have set up businesses to offer alternative financing products that comply with Islamic law, no such companies exist in Maine.

That means no credit cards, no mortgages and almost no car loans, leaving little opportunity for Muslims in Maine to establish credit or participate in certain aspects of the state’s economy.

“It’s a major problem,” Rikan said, noting that she was fortunate to get an interest-free loan from her uncle to open her Middle Eastern restaurant at 1192 Forest Ave.

Members of Maine’s Muslim community say many would like to buy homes and cars or start businesses but have been unable to for a variety of reasons, including the lack of financing options, inability to establish credit and a general lack of financial literacy.

Several organizations that assist immigrants and refugees in Maine have convened to examine the problem, which they say is holding back economic growth in some of the state’s most depressed areas. The World Affairs Council of Maine hosted a panel discussion on the issue in late February, and a follow-up panel is scheduled to meet this month.

FEW ISLAMIC FINANCING PROGRAMS

It isn’t just Muslim residents who are suffering from the lack of financing options, said John Scribner, business counselor at CEI, a Wiscasset-based community development corporation. The state’s economy also loses, he said, because a relatively high percentage of Maine’s Muslims want to start their own business.

“They’re probably the most entrepreneurial group I’ve ever seen,” said Scribner, who directs CEI’s StartSmart program, which offers business-development assistance to immigrants and refugees.

CEI is one of just two organizations in Maine that offer Islamic financing of any kind, along with the Androscoggin Valley Council of Governments in Auburn. Both offer micro-financing for Muslim-owned businesses, but no consumer, auto or home financing.

StartSmart business counselor Tae Chong said he would like to see some organization start a pilot project to offer consumer financing to Muslims in Maine. Thus far, no such program exists.

Chong said he believes any business that stepped up to offer financing to Muslim consumers would do well in Maine.

“It’s a phenomenal market that’s untapped,” he said.

SWITCH TO FEES, ‘CAN OF WORMS’

Islamic financing generally involves a simple substitution of fees for interest. The borrower does not pay any less than he or she would with a traditional loan.

However, the financing structure gets more complicated if the borrower repays the loan early or goes into default, said Edward Dox, loan officer for the Androscoggin Valley Council of Governments. Lewiston-Auburn experienced an influx of Somali immigrants in the early 2000s, prompting the council’s interest in exploring financing options for them.

The council has not developed a policy for dealing with a situation in which the borrower fails to repay the loan, Dox said, but it would have to work differently from a traditional loan default since there is no principal/interest structure.

“That was a can of worms where we weren’t quite sure what to do,” he said. Fortunately, of the two Islamic business loans the council has issued, both were repaid in full.

A SOLUTION IN SOME OTHER STATES

Institutions that operate in other states have developed Islam-compliant financing products that protect both lender and borrower in the event of a default.

For instance, Michigan-based University Islamic Financial offers the equivalent of home financing by purchasing homes on behalf of buyers and then selling them the homes at marked-up prices via installment plans, according to its website. If a client defaults, the bank sells the home and keeps its fair share of the proceeds.

University Islamic Financial, which did not return calls seeking comment, operates in several states but not in Maine.

SPECIAL INSTITUTION MAY BE NEEDED

Diane Field, senior vice president and director of retail at Androscoggin Bank in Lewiston, said the bank looked into the possibility of offering Islamic financing products but ultimately determined it would be too onerous.

As a traditional, Federal Deposit Insurance Corp.-insured bank, there are various rules and regulations that would make it difficult to offer such products, Field said.

“Banks are highly regulated – it’s a very challenging environment to set up something like that,” she said.

It most likely would take a specialized institution focused strictly on Islamic financing to offer such products in Maine, Field said. A company that already was set up in another state probably could do it, she said, but such institutions may not yet see a large enough market in Maine.

Part of the reason may be that a large percentage of Maine’s Muslims are relatively new to the United States and have yet to establish creditworthiness, said Claude Rwaganje, executive director of Portland-based Community Financial Literacy, a nonprofit organization that provides financial advice to hundreds of immigrants and refugees in Maine each year.

“They may not have a good credit history,” said Rwaganje, who was born in the Congo. “We come from a country where no credit history existed.”

SOME FIND A WAY, AND SUCCESS

Despite those challenges, a surprising number of immigrants and refugees are starting businesses and creating jobs by relying on alternative financing methods such as borrowing from friends and family, he said.

The impact of that success can be seen particularly in Lewiston, where many empty downtown storefronts have been filled by Somali-owned businesses, Rwaganje said.

It is happening in Portland, too.

Faysal Ali, who immigrated to the U.S. from Iraq in 2007 after working for the U.S. Army as an interpreter, purchased the Sindibad Market grocery store at 710 Forest Ave. from the previous owner in 2012 with $15,000 he borrowed from a friend.

Within two years, Ali had repaid the no-interest loan in full, and the business is doing well, he said.

Ali said he did not even bother to approach banks about Islamic financing because he knew it was not available.

“There are no loans without interest in the Portland area,” he said.