Canada never defined a halal mortgage

Canada was the last of this site's four editions without a primary text of its own. The United Kingdom edition has the provision that defines its home-finance product. The United States edition has the regulator's letter that permitted one arrangement for one applicant. The Australian edition has the definition of credit that catches a deferred-price sale without ever naming it. The open question was whether Canada had anything equivalent. It does not, and this entry does not invent one. What Canada has instead is more interesting for a reader of this site than a definition would have been: a federal definition of interest that is indifferent to what a payment is called, and a body of federal law that limits the rate of a return while saying nothing whatever about its form.

THE INSTRUMENTS. Three federal statutes, read from the consolidations published by the Minister of Justice: the Criminal Code (R.S.C., 1985, c. C-46), section 347 and its companion section 347.1; the Interest Act (R.S.C., 1985, c. I-15) in full; and the Bank Act (S.C. 1991, c. 46), sections 409, 410, 417 and 418. Each consolidation states its own currency on its face. The Interest Act is "Act current to 2026-06-17 and last amended on 2008-06-18" - Canada's general law of interest has not been touched since well before any of this became a public conversation. The Criminal Code is "Act current to 2026-06-17 and last amended on 2026-06-15", and the Bank Act is "Act current to 2026-06-17 and last amended on 2026-03-26". The issuer pages, and the Interest Act's own issuer PDF, are captured under .audit/sources/, so every span quoted below is re-checkable offline.

WHAT IS NOT IN ANY OF THEM, AND THE ABSENCE IS PROVED RATHER THAN ASSERTED. The words Islam, Islamic, Shariah, Sharia, Muslim, halal, usury and usurious do not appear anywhere in the Interest Act, anywhere in the Criminal Code or anywhere in the Bank Act. There is no provision in these three Acts that defines, names, permits or forbids an Islamic home-finance product. A reader who has been told that Canada is considering halal mortgages should be able to hold both facts at once: a government may say it is exploring something, and the statute book may still contain nothing at all about it.

THE DEFINITION THAT DOES THE WORK. Section 347 of the Criminal Code, under the marginal note "Criminal interest rate", makes it an offence for "every person who enters or offers to enter into an agreement or arrangement to receive interest at a criminal rate". It then defines interest for its own purposes, and the definition is built to defeat relabelling. Interest means "the aggregate of all charges and expenses, whether in the form of a fee, fine, penalty, commission or other similar charge or expense or in any other form, paid or payable for the advancing of credit under an agreement or arrangement", and it counts "irrespective of the person to whom any such charges and expenses are or are to be paid or payable". The name of the payment is worth nothing under this provision. What matters is that something is paid for the advancing of credit, in any form at all, to anyone at all.

THIS IS A LOOK-THROUGH RULE, AND SO IS THE FIQH QUESTION - BUT THEY LOOK THROUGH TO DIFFERENT THINGS, AND THIS ENTRY DOES NOT CONFLATE THEM. Section 347 disregards the label in order to measure a rate. The question a jurist asks when testing whether an arrangement is a device disregards the label in order to classify a contract. One enquiry ends in an annual percentage; the other ends in permitted or forbidden. That they share a technique is worth a reader's attention. It does not make them the same enquiry, and nothing in section 347 decides a question of fiqh.

WHAT THE DEFINITION LEAVES OUT is as instructive as what it catches. Interest under this section "but does not include any repayment of credit advanced or any insurance charge, official fee, overdraft charge, required deposit balance or, in the case of a mortgage or hypothec transaction, any amount required to be paid on account of property taxes". Returning the credit itself is not a charge for it - the same distinction, drawn for prosecutorial purposes, that separates a price from a return on money. And credit advanced is itself defined, as "the aggregate of the money and the monetary value of any goods, services or benefits actually advanced or to be advanced under an agreement or arrangement": goods and benefits, not only money.

THE RATE, NOT THE FORM. The offence bites only above a threshold. A criminal rate is "an annual percentage rate of interest calculated in accordance with generally accepted actuarial practices and principles that exceeds 35 per cent on the credit advanced". Below that ceiling the Interest Act leaves the field open, and does so under a marginal note that says exactly what it means: "No restriction except by statute". Section 2 reads "Except as otherwise provided by this Act or any other Act of Parliament, any person may stipulate for, allow and exact, on any contract or agreement whatever, any rate of interest or discount that is agreed on." Where the parties are silent, "the rate of interest shall be five per cent per annum". The two statutes interlock explicitly: the payday-loan carve-out in section 347.1 is drafted as "Section 347 and section 2 of the Interest Act do not apply to a person", so Parliament plainly reads them as one scheme.

AND THE FEDERAL RULES THAT DO TOUCH MORTGAGES ARE DISCLOSURE RULES, WITH A REMEDY THAT IS UNUSUALLY BLUNT. Section 4 of the Interest Act requires a contract charging at a period shorter than a year to state the equivalent yearly rate, and it opens by carving mortgages out of itself: "Except as to mortgages on real property or hypothecs on immovables". Mortgages get their own rule in section 6, which is triggered where principal and interest are made payable "on any plan under which the payments of principal money and interest are blended" - which is to say the ordinary amortising loan - and whose consequence is that "no interest whatever shall be chargeable, payable or recoverable on any part of the principal money advanced unless the mortgage or hypothec contains an express statement showing the amount of the principal money and the rate of interest chargeable on that money". Fail to state the rate and the return is not merely reduced, it is gone. Note what the duty is expressed in terms of: a rate of interest. How these provisions apply to an instrument that states no rate of interest at all is not a question they answer, and it is not one this entry answers.

THE AXIS IS PERPENDICULAR, AND THAT IS THE FINDING. On the face of these provisions, Canadian federal law fixes an outer limit on the price of credit and is deliberately indifferent to the form the price takes. The prohibition this site exists to explain runs the other way: it sets no ceiling on the profit of a sale or a lease that is permitted, and turns entirely on the form of the contract. Both are look-through rules. They look through to opposite things. A reader who expects Canadian law to have an opinion about whether a return is rent, mark-up or interest will not find one here; a reader who expects the prohibition to be satisfied by keeping a rate low will not find that either.

THE ONE PLACE WHERE THE TWO SYSTEMS LAND ON THE SAME RULE. Under the marginal note "No fine, etc., allowed on payments in arrears", the Interest Act provides: "No fine, penalty or rate of interest shall be stipulated for, taken, reserved or exacted on any arrears of principal or interest secured by mortgage on real property or hypothec on immovables that has the effect of increasing the charge on the arrears beyond the rate of interest payable on principal money not in arrears." An increase demanded because a debt was not paid on time is the least contested case of what the prohibition targets, and here a secular federal statute forbids it outright on a mortgage. The reasoning is not the same reasoning, and the next subsection proves it: "Nothing in this section has the effect of prohibiting a contract for the payment of interest on arrears of interest or principal at any rate not greater than the rate payable on principal money not in arrears." Canadian law permits the charge for the time in arrears at the ordinary rate and forbids only the increase. The rules meet at one point and part company immediately. This corpus already carries the collective ruling on how an institution that may charge nothing at all for delay is supposed to handle arrears; read beside it, this section shows how narrow the overlap really is.

THE BANK ACT, AND WHY IT READS DIFFERENTLY FROM THE UNITED STATES ENTRY IN THIS CORPUS. Section 409 confines a bank: "a bank shall not engage in or carry on any business other than the business of banking and such business generally as appertains thereto", where the business of banking includes "providing any financial service". Section 410 then adds activities a bank may carry on in addition, and the first of them is to "hold, manage and otherwise deal with real property". In the United States entry, an applicant had to obtain an interpretive letter from its regulator establishing that a residential net-lease arrangement was within a national bank's powers at all. In Canada, dealing with real property sits on the face of the Act as a permitted activity. THE DIFFERENCE MUST NOT BE OVERSTATED, and this entry states the limits: the American letter answered one named applicant on one set of facts under a different statute and considered a specific structure, while section 410 is a general permission that names no product, contemplates no financing structure, and settles nothing about how such an arrangement would be treated by a supervisor, by tax law or by the law of a province. Leasing is separately restricted: section 417 provides that "A bank shall not engage in Canada in any personal property leasing activity in which a financial leasing entity, as defined in subsection 464(1), is not permitted to engage."

AND THE PROVISION THAT GOVERNS THE ORDINARY CANADIAN HOME PURCHASE SPEAKS A VOCABULARY THIS SITE'S STRUCTURES DO NOT USE. Under the marginal note "Restriction on residential mortgages", section 418 provides: "A bank shall not make a loan in Canada on the security of residential property in Canada for the purpose of purchasing, renovating or improving that property, or refinance such a loan, if the amount of the loan, together with the amount then outstanding of any mortgage having an equal or prior claim against the property, would exceed 80 per cent of the value of the property at the time of the loan." The ceiling lifts where repayment of the excess is "guaranteed or insured by a government agency or a private insurer approved by the Superintendent" - which is why mortgage insurance, not the contract, is what moves the limit. Every operative word here is a lending word: loan, security, mortgage, refinance. Whether a deferred-price sale, a lease-to-own or a diminishing partnership is a loan on the security of residential property for the purposes of this section is a question the section does not answer, and this entry does not answer it either.

WHAT THIS ENTRY DOES NOT CONCLUDE, and the restraint is the point. It reaches no conclusion about whether any Canadian arrangement falls within the prohibition this site explains. It does not say whether any particular structure involves credit advanced, or attracts interest, as section 347 defines those words. It does not say whether any structure falls inside or outside section 418. It names no provider and grades none. These are secular instruments - a criminal prohibition, a general law of interest and a bank-powers Act - and none of them makes a Shariah determination.

WHAT WAS PROBED AND LEFT OPEN, HONESTLY. Provincial law was not read for this entry. Consumer protection and the tax charged on a transfer of land are provincial matters in Canada, and a purchase carried out as two transfers can meet a transfer tax twice; because nothing primary from a province was read, this entry asserts nothing in either direction about any province, and a reader should not take silence here for a finding. Nor does it claim to have read the whole federal statute book: the absence gated above is an absence in the three Acts named, which are the three a Canadian reader is most often pointed to. This corpus already carries a secondary analysis of the 2024 federal budget statement that the government intended to explore measures for alternative financing products; no enacted federal instrument naming such products was found while preparing this entry, and a failure to find is not proof of absence.

WHY THIS MATTERS TO A READER RATHER THAN TO A LAWYER. Four editions of this site now carry a primary text each, and the four texts do four different things. One defines the product. One permitted a version of it for a single applicant. One defines credit widely enough to catch it without naming it. This one defines interest so broadly that the name of a payment is irrelevant, and then caps only its rate. Not one of the four tells a Muslim whether a product is permitted. That is precisely why they belong in this corpus: the law of a country decides what is supervised, what must be disclosed and what is criminal, and it leaves the question this site is actually about completely alone.