Minneapolis operates a loan program for business owners who don’t want to pay interest for religious reasons — and $1.44 million has already been issued through that program.
The city’s Alternative Financing program was created specifically to comply with Islamic law, or Sharia, which prohibits charging or paying interest — known as riba — and instead relies on financing structures that generate a return without conventional interest.
Since officially launching in 2007, the Alternative Financing program has issued loans to 48 businesses totaling $1.44 million, according to information the city provided to Alpha News. Eight loans are currently active and totaled $470,000 when they were disbursed.
The Minneapolis City Council first approved the Alternative Financing program in 2006 as a complement to the city’s Two Percent Loan Program that provides loans to city businesses.
Now, the Alternative Financing program is drawing national attention after journalist Natalie Winters highlighted Minneapolis’ Sharia-compliant financing. Winter’s social media post had a list of instances where Sharia-compliant financing is being promoted.
EXC: Sharia financing is being adopted as official government policy across America.
I found dozens of examples of cities, states and federal regulators changing loan programs, tax rules, banking policy and economic-development plans to accommodate Islam.
Here’s the list 🧵
— Natalie Winters (@nataliegwinters) August 12, 2026
A 2% ‘rate of return’ instead of 2% interest
In Minneapolis, city government operates a program called the Two Percent Loan program. That program allows businesses in the city to receive a loan from a private lender and have Minneapolis match that sum up to $75,000.
Businesses can only use the money for equipment or to improve their building. The private lender sets their own financial terms for its portion of the loan, and Minneapolis charges 2% interest on its portion of the loan. The loan term cannot exceed 10 years.
The Alternative Financing program is a variation of the same program but it allows Muslims to obtain those same loans without having to pay the 2% interest. Instead, Muslims using the Alternative Financing program pay a 2% “rate of return” charge.
“A private lender provides half the financing at their rate of return, and the City provides the rest, up to $75,000, at a 2% rate of return,” a city spokesperson told Alpha News.
“The term (up to 10 years) is set by the lender. Private lender fees vary, and the City charges an origination fee of 1 percent of the City’s principal amount with a minimum of $150, due at closing,” added the spokesperson.
In short, the city receives a financial return on the investment it made into the business rather than charging interest on a set schedule. Despite the different terminology and structure, Minneapolis says it comes out the same financially.
“The City receives the same financial return as compared to the City’s conventional financing, the Two Percent Loan program,” the spokesperson said.
Not every loan, however, has been repaid as planned.
“Some of these Alternative Financing loans and the Two Percent Loans have resulted in a default,” the city said.
Alternative Financing can be used by Muslims and non-Muslims alike.
Minnesota has also accommodated Sharia-compliant financing
Sharia-compliant products of various kinds are being used across the country, with Sharia-compliant home mortgage products being among them.
In fact, the Minnesota Department of Revenue (MDR) has specific instructions on how the mortgage registry tax should be applied in Sharia-compliant home financing.
According to MDR, Sharia-compliant home mortgages are “often structured using ‘cost plus profit’ components, instead of the ‘principal plus interest’ components that are traditional in Minnesota Mortgages.”
This means a Sharia-compliant home mortgage simply calculates out how much interest would be paid during the mortgage term and applies that sum to the price of the house.
MDR’s guidance on Sharia-compliant mortgages says only the underlying cost of the house, not the fully amortized sum, should be subject to the mortgage registry tax.
Jenna Gloeb
Jenna Gloeb is an Edward R. Murrow Award-winning journalist, media producer, public speaker, and screenwriter. Most recently, she worked as a reporter and on-air host for CCX Media. Jenna is a Minnesota native and resides in the Twin Cities with her husband, son, daughter, and two dogs.
