Abdirizak Bille of Minneapolis, a practicing Muslim, faced a quandary when he decided to start a small bus transportation service. Bille needed a loan to get the business going, but traditional Islamic law prohibits him from paying interest, or reba, on debt.

Until recently, options have been limited for Muslim entrepreneurs like Bille. But in May, because of new efforts by Twin Cities groups, Bille was able to obtain interest-free financing for his firm, which transports immigrants to English classes.

Bille financed a 34-person school bus with $15,000 borrowed from the Neighborhood Development Center in St. Paul. The group built a $2,000 profit into his repayment plan. Bille pays no interest, and the center still earns an annual return because the profit replaces interest.

"I prefer to stay out of business than participate with interest," said Bille. Without the alternative financing, he would have needed to save enough money to buy the bus, or try to borrow money interest-free from friends, he said.

Twin Cities Muslims have spent the past year educating government officials, lenders and civic leaders about the need to accommodate Islamic beliefs through alternative financing. Banks say strict regulations have kept them from stepping up to meet the need.

Muslim and financial leaders agree that it's not just a personal or religious issue; it's also a community and economic concern. They say a lack of acceptable financing has slowed Islamic entrepreneurial efforts and stunted business expansion in the Twin Cities. Some say the void has prevented Muslims from expanding their wealth, which has lessened their economic impact on the region.

Nationally, the Islamic community is growing in numbers and affluence. The 6 million Muslims living in the United States (out of 1.2 billion worldwide) have a per capita income of $35,000 to $45,000, well above the national average of $24,000 to $27,000, according to Islamic Horizons magazine.

An estimated 75,000 Muslims live in the Twin Cities (up from about 45,000 five years ago), with 100,000 living in Minnesota.

Nonprofit groups have seen the need for alternative financing during business training classes, especially among recent Somali immigrants, who tend to be more observant of the Islamic religion. Minnesota has one of the nation's largest populations of Somali refugees, estimated to be as high as 40,000 people.

Mike Temali, executive director of the Neighborhood Development Center in St. Paul, started Reba Free Investments earlier this year to provide small-business financing. He saw Muslim immigrants become discouraged about starting a business because they couldn't get a loan.

Several local Islamic financing programs have recently begun or are in the planning stages:

-- Phillips Community Development Corp. and the Minneapolis Community Development Agency each recently financed one Islamic business owner with administrative fees replacing interest. Both seek ways to make the programs acceptable to more orthodox Muslims.

-- The Minneapolis Consortium of Community Developers has provided two fee-based financings to Islamic businesses as a pilot program. The nonprofit group wants to establish a micro-venture capital fund within two years that would cater to the needs of Muslims and others. It is also exploring other funding options.

-- Dalsan Auto Dealer, a Somali used car dealership in Minneapolis, opened a year ago to sell cars and provide interest-free financing to customers.

-- Nationally, a few companies such as American House Finance Lariba and MSI Financial Services offer car and equipment leasing and interest-free financing for houses and businesses to people living in Minnesota. Some local efforts also are focusing on Islamic home ownership.

-- A Twin Cities group is working to form an Islamic credit union.

-- Banks such as Wells Fargo & Co. and University Bank are exploring how they can help Islamic businesses and encourage home ownership.

"There is a big need to do this,'' said Wafiq Fannoun, a consultant for many Twin Cities nonprofit groups and banks on how to provide Islamic financing. "The Muslim community in the Twin Cities has been trying to do this for 10 years.

"Many Muslims in Minnesota have no choice but to get a traditional bank loan. We all do it out of need. This is the system. I can't change it overnight, but this is a start."

Hamdy El-Sawaf, executive director of the Islamic Center of Minnesota, said Islam is the world's fastest-growing religion but Muslims still struggle for greater social understanding.

INTEREST FORBIDDEN

Muslims from Africa, Asia, India, the Middle East and Eastern Europe follow a religion founded 1,400 years ago. Islamic law, or Shari'ah, is based on the Koran, the holy book of God, and the teachings of the Prophet Mohammed. It strongly influences Muslim life.

Islamic law strictly forbids the giving or receiving of interest. Muslims believe in maintaining economic harmony in any financial transaction. It is not acceptable for a well-off person to benefit from lending money to someone less fortunate. Money is shared as a way to help the community prosper.

That belief can affect how Muslims finance a house, a car or an education, how they start a business, how they pay bills and how they use credit cards.

The payment of interest is either a major or minor obstacle, depending on how orthodox a Muslim is. Many traditional Muslims in the Twin Cities don't own a house or have a bank savings account. If they have a savings account, they typically donate the interest to charity.

Financing agreements acceptable under Islamic law include buy-sell and buy-lease agreements, interest-free loans, cost-plus-profit contracts, stock investments and partnerships.

Osman Ali took advantage of a buy-sell agreement when he started a business in May to deliver about 400 meals a week and cater events for Tariq's, a Somali restaurant in Minneapolis. The Neighborhood Development Center bought a 1995 Dodge Caravan and equipment and resold it to Ali at a profit for $5,323 with monthly payments of $443.64 for one year.

But other Twin Cities Muslims, faced with few options, have used their savings and relied on the generosity of family and friends, much as other immigrant groups have done. Others, especially the Somali community, pool their money in a group setup somewhat like an investment club.

One of those is Halimo Yusef, who opened a clothing shop called Beautiful Woman a year ago at the Karmel Souk, a Somali mini-mall in Minneapolis. Yusef, her Somali partner and the owners of four other shops there formed a financing pool: Each shop contributes $1,000 a month and one receives the $5,000, she said. The next month, the $5,000 goes to another shop until all five have received the pot. Then it repeats.

Yusef uses the infusion of interest-free money to restock her store with clothing, toiletries and housewares from Chicago, New York and overseas. But to break even or expand, she needs more money to buy more merchandise.

"In general, immigrant communities are very resourceful and tend to draw money from their extended families," said Ed Lambert, executive director of the Minneapolis Consortium, an association of nonprofit community development corporations in the Minneapolis area. "But there are plenty (of Muslims) who do not have the kind of extended family that can provide that kind of support."

In seeking financing from other sources, Muslims may find obstacles in the form of state and federal laws. In addition, many of the nonprofit groups trying to help them face funding issues.

For example, Muslims didn't have access to the Neighborhood Development Center's program earlier this year because it ran out of money. The center had been banking on receiving money from the Minnesota Department of Trade and Economic Development's urban initiative program, but it ran into a legal snag. State law prohibits state loan funds to be used to buy equipment and lease it to a business, said Bart Bevins, who administers the department's Urban Initiative program.

Bevins believes a legislative amendment may be proposed next year. In the meantime, the Neighborhood Development Center last month received a $100,000 grant from the Minneapolis Foundation for Reba Free and hopes to receive money from several other sources, Temali said.

BANKS HELD BACK

Nonprofit groups, rather than banks, have led Islamic financing efforts in the Twin Cities because banks say they're bound by regulations. Changing regulations to accommodate Muslims would radically alter the banking industry, which traditionally is slow to adopt innovations.

"It's new territory for the regulators," said David Reiling, president of University Bank in St. Paul. "They're not going to invent anything and they're not going to say you can do it. Once someone does it and if there aren't any blatant regulation violations, they will monitor it closely and see how it works."

Banks have increased outreach and education to ethnic groups such as Latinos and Asians, but Islamic financing is a bigger risk because it requires a new financing structure, not just a new name for the same old product. But Muffie Gabler, Wells Fargo's vice president of community development for the Midwest, points out: "This is something that we need to be aware of and deal with because these are emerging markets ... and that's the growing part of our customer base."

One answer to the financial difficulties facing Muslims may be the Islamic Credit Union of Minnesota, which a group of Muslims is trying to form to develop a financial system within Islamic guidelines. It would be the first Islamic credit union in the nation.

The group, which has been focused on educating Muslims about what a credit union is, is collecting fund-raising pledges and earlier this year launched a Web site at www.icumn.org and printed educational pamphlets to hand out at Islamic events, said Fawzi Awad, one of the organizers. He wants to have a credit union proposed to the state this fall, but has not yet approached state or federal regulatory agencies.

"We don't want to be viewed as establishing something different from the norm, but we want to create something we believe in," Awad said. "This could be a solution to some of the issues we deal with in society."