February 15, 2024
9 mins

A 2024 Canadian Guide to Islamic Banks and Finance in Canada

Summary.This comprehensive article examines Islamic banking in Canada, focusing on its foundation in Shariah law, which prohibits interest and emphasizes profit and loss sharing. It traces the origins of Islamic banking...

Canada is celebrated for its diversity. Islamic banking in Canada represents a pivotal financial avenue catering to the unique needs of over a million Muslims. Islamic banks in Canada, grounded in Shariah law, offer a range of financial services that align with the ethical and religious beliefs of the Muslim community. With its religious intricacies and contrasts with conventional banking, Shariah-compliant finance can contribute best practices for the broader national banking system.

Islamic banking principles

An illustration of people in front of a mosque

Islamic banking, also known as Shariah-compliant finance, is distinguished by its adherence to Islamic law. Central to its operation are two core principles: the prohibition of interest (Riba) and the sharing of profit and loss (Musyarakah).

Unlike conventional banks that thrive on interest rates, Islamic banks participate in equity. This means profits are earned through investment and shared business ventures, ensuring transactions remain ethical and mutually beneficial.

The genesis of Islamic banking

Tracing its origins back to the Middle East, Islamic banking has evolved significantly from its early days of trade and commerce. The concept of interest-free financial transactions laid the groundwork for a banking system that is equitable and socially responsible.

The re-emergence of Islamic banking in the 20th century has seen a proliferation of Shariah-compliant institutions worldwide, with Canada becoming a notable participant in recent years.


The Canadian Context

With a Muslim population projected to reach up to 7.2% by 2036, the demand for Islamic financial services in Canada is on the rise. Despite this growing demand, the availability of Shariah-compliant banking options remains limited, posing challenges for Muslim Canadians seeking to align their financial activities with their faith.

The emergence of Islamic banks and financial institutions in Canada responds to this need, providing ethical banking solutions that comply with Islamic principles.

Islamic banks, compared to conventional banks

The fundamental difference between Islamic banks and their conventional counterparts lies in their approach to interest and investment. Islamic banking prohibits the collection of interest, focusing instead on profit-sharing mechanisms.

This ethical stance against usury and speculation distinguishes Islamic banks, making them a preferred choice for those adhering to Islamic financial ethics.

The landscape of Islamic banking in Canada

Canada's Islamic banking sector, though nascent, is vibrant and growing. Institutions like Manzil and Aya Financial Inc. have emerged as leaders in offering Shariah-compliant mortgages and financial products. These institutions cater to the needs of the Muslim community, providing alternatives to conventional mortgages and loans that comply with Islamic law.

The presence of Islamic banks in Canada serves the financial needs of Muslim Canadians and contributes to the diversity and inclusivity of Canada's financial industry.

Shariah-compliant banks and financial products in Canada

An illustration of a smartphone with Islamic-related visual items

Various Shariah-compliant financial products are available to Canadian Muslims, including halal mortgages, Islamic insurance (Takaful), and investment opportunities. These products are designed to facilitate homeownership and investment without compromising Islamic ethical standards. The development of these products reflects a significant advancement in Islamic finance, addressing the unique financial needs of the Muslim community in Canada.

Islamic banks in Canada

Canada has several institutions and services that offer Islamic banking and Shariah-compliant financial products. These institutions cater to various needs, including mortgages, cooperative housing, and investment products. Notable mentions include:

Note: Links have been provided where available.


Investment products

For Islamic investment products and robo-advisors or investment managers, Canada has several options:

Note: This list is not exhaustive.

This array of options reflects Canada's growing demand and diverse needs for Islamic financial services. You can visit their official websites or contact them directly for more detailed information and to explore each institution's specific services.

Challenges and opportunities

While the growth of Islamic banking in Canada is promising, it faces challenges, including regulatory hurdles and a lack of awareness among the public. However, these challenges also present opportunities for innovation and development within the sector. The increasing interest in Islamic finance from Muslim and non-Muslim Canadians indicates a broadening market and the potential for significant economic impact.

The future of Islamic banking in Canada

As Canada's Muslim population continues to grow, the demand for Shariah-compliant financial services is expected to rise. This presents a unique opportunity for Canadian financial institutions to expand their offerings and for the government to support the growth of Islamic finance.

The future of Islamic banking in Canada looks bright, with the potential to become a hub for Shariah-compliant finance in North America.

Expanding the Canadian Islamic finance landscape

The landscape of Islamic finance in Canada is evolving, driven by the increasing demand from a growing Muslim population. As highlighted by Statistics Canada and research from the University of Toronto's Walid Hejazi, the Muslim community in Canada is not only expanding but also becoming increasingly financially literate and economically active. This shift has prompted existing Islamic financial institutions and new players to innovate and offer a wider array of Shariah-compliant financial products.

Bridging the gap with halal mortgages and Islamic insurance

One of Canada's most significant growth areas in Islamic finance is in halal mortgages and Islamic insurance products. Companies like Manzil and Aya Financial Inc. have been at the forefront, offering Shariah-compliant mortgages catering to Muslim Canadians looking to own homes without compromising their religious beliefs.

Similarly, the introduction of Takaful, or Islamic insurance, provides a halal alternative to conventional insurance, aligning with the ethical and religious values of the Muslim community.


Islamic banking and Canadian law

Navigating the intricacies of Canadian law while adhering to Islamic principles presents a unique challenge for Islamic financial institutions. The legal framework in Canada is accommodating, yet it requires Islamic banks and financial products to innovate within the confines of Shariah law and Canadian regulatory standards. This has led to creative financial solutions that respect Islamic ethics while ensuring compliance with national regulations, fostering a conducive environment for Islamic finance to thrive.

Education and awareness: The role of academic institutions

The growth of Islamic finance in Canada has been supported by academic research and education. Institutions like the University of Toronto and its Rotman School of Management have played a pivotal role in studying Islamic finance's economic impact and educating the financial sector and the general public. Such efforts are crucial in overcoming misconceptions about Islamic banking and highlighting its benefits for Muslim Canadians and the Canadian economy as a whole.

Islamic finance: A catalyst for economic growth

The integration of Islamic finance into the Canadian financial system has the potential to be a significant catalyst for economic growth. With its emphasis on risk-sharing and ethical investing, Islamic finance can attract foreign investment from Muslim-majority countries and the Middle East, enhancing Canada's position in the global financial market.

Moreover, the principles of Islamic finance align with the growing trend towards ethical and socially responsible investing, appealing to a broader audience beyond the Muslim community.

Challenges ahead: Regulation and market acceptance

Despite the positive trajectory, the development of Islamic finance in Canada faces challenges. Regulatory adjustments are needed better to accommodate the unique model of Islamic banking and finance, ensuring a level playing field with conventional financial institutions.

Additionally, broader market acceptance and understanding of Islamic finance principles among Canadians and within the financial sector are essential for its continued growth and integration into the mainstream Canadian financial landscape.

Market gaps in Shariah-compliant financial services

Major financial players welcome inclusion. They view Shariah-compliant banking as another way they can help meet broader consumers' needs. Still, support of Islamic finance must expand their offerings, especially in the areas of:

  • Car loans
  • Commercial real estate
  • Equipment leasing
  • Payment processing services
  • Peer-to-Peer (P2P lending

Also, there is still a massive service gap in Shariah-compliant banking, even basic financial services like those needed for everyday transactions and deposits.

An underserved Muslim population

In Canada, the halal retail market is strong. Likewise, the halal investment product market is slowly expanding. Much of this expansion is due to grassroots demand of Muslim communities. Canadian bankers should remain aware that the Canadian Muslim community is highly active in consumerism and supporting the country's economy. As a result, pushing further evolution in this banking sector is more important than ever.


Islamic banking and finance in Canada represent a dynamic and growing sector, reflecting the diversity and inclusivity of the Canadian financial landscape. As the demand for Shariah-compliant financial products increases, Canadian banks, regulatory bodies, and the government are presented with the opportunity to embrace and facilitate the expansion of Islamic finance.

This serves the needs of the Muslim community and contributes to the broader objectives of financial inclusion and economic diversity. The future of Islamic finance in Canada is bright, with endless possibilities for growth, innovation, and contribution to Canada's economic prosperity.


Frequently asked questions

  • Does Canada have Islamic banks?

    Canada has several financial institutions and banks that offer Islamic banking services compliant with Shariah law. While there may not be Islamic banks in the traditional sense, like those found in Muslim-majority countries, several Canadian financial entities provide Shariah-compliant products and services. These include halal mortgages, Islamic financing, and investment opportunities tailored to meet the needs of the Muslim community in adherence to Islamic principles.

  • Which bank is best for Islamic banking?

    Determining the “best” bank for Islamic banking depends on the specific needs and preferences of the individual or business seeking Shariah-compliant financial services. In Canada, institutions such as Manzil and Aya Financial Inc. have garnered positive attention for their Islamic financial products, including Shariah-compliant mortgages and investment opportunities. Prospective customers should consider factors such as the range of products offered, the bank’s adherence to Islamic principles, customer service, and the overall reputation within the Muslim community.

  • Are there Islamic mortgages in Canada?

    Yes, there are Islamic mortgages available in Canada designed to comply with Shariah law, providing Muslims with the opportunity to finance their homes without compromising their religious beliefs. Islamic mortgages in Canada are structured differently from conventional mortgages to avoid interest payments, which are prohibited under Islamic law. Instead, they utilize contracts based on profit-sharing, lease-to-own agreements (Ijara), or partnership agreements (Musharaka), making homeownership accessible and halal for Muslim Canadians.

  • Is Habib Canadian Bank an Islamic bank?

    Habib Canadian Bank, part of the larger Habib Bank AG Zurich group, offers various financial services in Canada. While it provides services to a diverse clientele, including the Muslim community, it is not exclusively an Islamic bank nor marketed as such. For individuals specifically seeking Shariah-compliant banking services, it’s important to research and consult with banks directly about their Islamic financial products to ensure they meet the criteria of Shariah compliance.

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