Overcoming the financial challenges facing Islamic microfinance

Dr Ajaz Ahmed Khan, 3rd Global Islamic Microfinance Forum, Dubai, 6th October 2013

Blue Mosque, Istanbul, Turkey

Why is Islamic microfinance not more widespread?

• Profit sharing involves high transactions costs

• Requires high level of transparency - the difficulty associated with calculating profits and losses

• Low institutional technical capacity, established policies and procedures and guidance

• Authenticity and what is really ‘Shari’ah Compliant’?

• Lack of fundingImam Mosque, Isfahan, Iran

How can we overcome the lack of funding?

• Provide more services than just credit (savings, takaful, money transfer, etc.).

• Establish better links with the Islamic finance industry and encourage them to downscale.

• Establish better links with Islamic institutional donors.

• Establish specialist Islamic microfinance investment funds.

Sana’a, Yemen

P2P lending: the lendwithcare experience• Raised more than $5 million in capital, and growing

exponentially - raising more than $300,000 per month• More than 13,000 individual lenders (95% from the UK)

and attracting 500 new lenders each month• 98% of lenders re-lend• Making microfinance affordable for anyone anywhere

Badshahi Mosque, Lahore, Pakistan

Why not create an Islamic peer to peer lending/donation platform?

Would offer several advantages:•Generate new capital•Secure, steady, long-term funding for MFIs – much cheaper than commercial sources and independent of the whims of institutional donors•Outlet for sadaqah and zakat•Making microfinance affordable•Ensuring the focus remains on improving poor peoples lives.

Timbuktu, Mali

192 Ahmad Block, New Garden Town, Lahore - Pakistan.Ph: (92-42) 35913096 - 98, Fax: (92-42) 35913056

Email: info@alhudacibe.com

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