Poverty to Profit: Islamic Microfinance – Part 1
Using Islamic microfinance to alleviate poverty
Poverty alleviation has traditionally been the domain of the interest-based development agency and profit generation has always been the mainstay of the corporation. Rarely have the two overlapped: corporate shareholders have no interest in giving money away and development banks have little to offer profit-oriented investors. Until microfinance. For perhaps the first time in economic development history the poor are seen as potentially profitable.
Islamic Finance – An Emerging Segment of Global Finance
Islamic banking is a system consistent with the principles of Islamic (Sharia) law and its practical application through the development of Islamic economics. According to CIMB Group Holdings, Islamic finance is regarded as the fastest growing segment of the global financial system – sales of Islamic bonds may rise by 24 percent to a staggering $25 billion in 2010.
Islamic Finance
Islamic finance is a centuries-old practice that is incessantly marking its significance in not only the Eastern but also the Western states. So what exactly is this practice that has captivated the interest of millions across the globe and is gaining continuous recognition? Islamic finance is the process through which the financial conglomerates in the Muslim world inclusive of their banks and further loan giving financial organizations raise their capital in agreement to the Islamic rules and regulations that are called as the “Shari’ah”. The various categories of investments that are permissible under the Shri’ah are included in this field.
Microfinance and Islamic Finance – a Perfect Match
Islamic banking is one of the fastest growing sectors of the financial industry. But in order for Islamic Financial Institutions (IFIs) to remain competitive with conventional banks, IFIs must be able to deliver specialized products and services to meet customer needs. Microfinance-a division of finance ideologically compatible with Islamic finance, capable of Shariah-compliancy, and possessing a sizeable potential market-is a perfect fit for inclusion in IFIs’ new products and services.
The Appeal of Islamic Financial Institutions is Increasing
As strange as it may seem that there are financial institutions that are benefiting from the global financial meltdown, in the past few months Islamic Financial Institutions have been reporting significant pick up in business. Islamic financial institutions increasingly appeal to Muslim and non-Muslim customers alike. To me this shows that Adam Smith’s invisible hand is alive and well notwithstanding reports of its demise. In any functioning capitalist system, the financially strong benefit from the financially weak, even if the latter are heavily supported through the use of taxpayers money. Maybe an explanation is in order.