The global economic downturn has brought the ethics and sustainability of modern banking practices into question, but could Islamic microfinance provide a more equitable alternative to current economic challenges?
Although many organisations offer microcredit to poor communities, few initiatives use Islamic finance principles which prohibit the use of interest. Many Muslim borrowers refrain from accessing interest-based loans for fear of breaching their religious principles while interest can also keep poor communities trapped in a cycle of debt and prevent them from becoming self-sufficient.
Islamic microfinance promotes ethical investment and business practices among micro-entrepreneurs. The focus is on “fairer” lending procedures for the poor, the sharing of risk between lender and borrower, the prohibition of interest and the imperative only to invest in ethical ventures.
The CEO of Islamic Relief Worldwide Saleh Saeed said, "Although around half of those living in absolute poverty worldwide are Muslims, less than one per cent of global microfinance programmes are Shariah compliant. This is one of the reasons why many Muslims choose not to use financial services as they do not conform to their religious beliefs.
“In order to lift people out of poverty it is extremely important that the finance and development community work together to increase and strengthen the availability of Islamic financial services, particularly amongst the poor where access is most limited.”
International aid agency Islamic Relief has developed the use of Islamic microfinancing techniques in development and helps some of the poorest communities and those worst affected by the recession to become economically self-sufficient. These loans have helped tens of thousands of people from Bosnia-Herzegovina to Bangladesh, Pakistan to the Occupied Palestinian Territories, set up or expand their own businesses, allowing them to live with dignity and independence.
In Pakistan where three-quarters of the population live on less than $2 a day, Islamic Relief is working with HSBC to expand its microfinance programme. D Ajaz Ahmed Khan, Islamic Relief’s Head of Policy and Research said, “In Pakistan our Shari’ah-compliant microfinance project not only provides the capital to help people set up their own businesses but also provides essential training and support to ensure the success of these ventures.”
“We are currently working with HSBC to provide loans to vulnerable people across Islamabad and Rawalpindi, but are looking to expand to other parts of the country in the near future. We are very proud that over 40 per cent of the beneficiaries of this project are women and many are widows who are now supporting their entire family through their businesses.”
As part of Islamic Relief’s 25th anniversary celebrations, Islamic Relief is leading discussions on Islamic microfinance as a solution to poverty. On 19th January 2010 you can join the debate at a unique microfinance conference at the law firm Clifford Chance, London.
The event will give delegates the opportunity to learn more about the theory and practice of Islamic microfinance, and how it can be used as part of sustainable development programmes. There will also be the opportunity to discuss the future of Islamic microfinance as a solution to poverty.
Chairing the discussions will be Mohammed Amin who heads up PricewaterhouseCoopers Islamic Finance practice in the UK. Keynote speakers include Dr Ajaz Ahmed Khan, Head of Policy and Research at Islamic Relief Worldwide, Amjid Ali, UK Head & Senior Manager, HSBC Amanah Global, and Riaz Hassan, National Sales Manager for HSBC Amanah.
For interviews with Dr Ajaz Ahmed Khan or other keynote speakers, and for more information about the conference, please contact: Samia.firstname.lastname@example.org
Photo and case studies regarding Islamic Relief’s microfinance programmes are also available.
Notes to editors:
- Mohammed Amin MA FCA AMCT CTA (fellow) is a partner in PricewaterhouseCoopers LLP. He leads PwC’s Islamic Finance practice in the UK and is a member of the HM Treasury’s Islamic Finance Experts Group. He regularly speaks on Islamic microfinance and has his own blog http://pwc.blogs.com/islamicfinance
- Riaz Hassan has been the National Sales Manager for HSBC Amanah since 2008, where he has seen a marked growth in the Islamic Finance industry.
- Islamic Relief is an international aid agency with its headquarters in Birmingham, UK. We work in 26 countries in Africa, Asia, Middle East and Eastern Europe responding to emergencies and supporting sustainable development with vulnerable communities.
- For more information please visit: www.islamic-relief.com