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Microfinance

Looking for new ways to serve Muslim microfinance clients

Mayada El-Zoghbi's picture
“To alleviate poverty in Pakistan, we have to focus on the farmers,” says Farida Tariq, founder and chief executive officer of Wasil Foundation, a microfinance institution. “But many farmers will not opt for interest-based lending because of religious reasons.”
 
To address this gap, Wasil started offering a Sharia-compliant microfinance package aimed specifically at smallholder farmers.
 
Wasil Foundation: Islamic Financing to Farmers

Wasil is an example of how microfinance and Islamic finance can be successfully combined.
 
An estimated 650 million Muslims live on less than $2 a day. Examples like Wasil show that Islamic microfinance can play a key role in bringing the poor into the financial mainstream in a way that doesn’t force them to choose between their religious practices and their wallets.

But despite an impressive increase in the number of financial service providers that offer Sharia-compliant microfinance products in Muslim countries, Islamic microfinance is still limited to a few countries. The range of offerings is narrow as well – most are largely focused on the cost-plus-markup product known as murabaha, which is geared toward asset purchases. 

How can regional integration improve access to finance in South Asia?

Sarmad Shaikh's picture

South Asia is the least integrated region in the world. Intra-regional trade in South Asia is less than 2% of GDP compared to over 20% in East Asia. Labor mobility and regional travel is minimal, with few exceptions. Even remote communication is low – only 7% of international telephone calls in South Asia are to countries within the region, compared to 71% for East Asia. The case for closer integration has remained strong for a while now, and it is refreshing to see that some movement, albeit watchful, in addressing some of the region's deep rooted political economy issues, particularly between India and Pakistan.

The discussions around closer integration have centered on energy, trade, connectivity and stability. All of these offer strong potential to enhance growth in the region. However, financial sector integration overall, and access to finance in particular, hardly ever make it to the agenda of regional integration forums and deliberations. This is unfortunate, because the region has a long way to go in providing adequate access to financial services and insurance products, especially to the vulnerable segments of the population. Given that South Asia is home to more than half a billion of the world’s poor, this becomes a poverty reduction goal as much as a financial inclusion goal.

To End Extreme Poverty, Learn from a Small Village in India

Sri Mulyani Indrawati's picture

Photo: Nandita Roy / World Bank
"Five years ago, I was no one," said Kunti Devi to me, sitting up straight against the wall of her one-room mud hut in Bara, a small village in India's eastern state of Bihar. "Now, people know me by my own name, not just by the name of my children."

I was sitting on the floor, across from Devi, a mother of eight, who belonged to one of the most vulnerable and socially excluded castes in India. She recalled how when her husband got injured and lost his job a few years ago, the family was pushed over the brink — from subsistence to hunger and poverty. At the time, Devi took a bold step for a poor woman used to living in the shadows of society. She joined a women's self-help group in her village and took a small loan to raise goats. With the income she generated, she repaid her first loan and took another one — this time to lease land to produce grain. She borrowed again when her family faced a health crisis. Today, Devi has several sources of income. She is also planning ahead. She wants to open a food outlet on a busy road. And now, with two of her sons married, she wants to find a larger living space for her growing family.

Can Islamic Microfinance spur Inclusive Prosperity?

Ahmed Rostom's picture


Can Islamic Microfinance give more people access to the financial services they need to grow their business? (Credit: DFID, Flickr Creative Commons)
Research has shown that financial sector development and the efficiency of financial systems are closely linked to economic growth. Ensuring the provision of financial services to the poor can also address the challenge of poverty alleviation and directly target financing towards economically and socially underprivileged groups. Appropriate financial services, such as savings services, investment, insurance, and payment and money transfer facilities,  enable the poor to acquire capital to engage in productive ventures, manage risks, increase their income and savings, and escape poverty.

Keeping the hope alive in Myanmar

Axel van Trotsenburg's picture
Axel talks about his trip to Myanmar in a video below.

You can feel the energy in Myanmar today—from the streets of Yangon, in the offices of government ministries and in rural villages. Dramatic political and economic changes are sweeping the country.

A Global Wave of Financial Inclusion Targets?

Douglas Pearce's picture

Credit: IITA

On October 23, Nigeria joined a fast-growing list of countries making headline commitments to financial inclusion targets and actions,by launching a new Financial Inclusion Strategy. 

A total of 35 countries have now made commitments through the ‘Maya Declaration’ of the Alliance for Financial Inclusion (a global network of financial regulators), including 19 as recently as September 2012. 17 countries committed in June 2012 to targets, actions, and coordination platforms through the new G20 Financial Inclusion Peer Learning Program.  These new commitments and targets could have a significant impact in advancing financial inclusion, if the challenges in meeting them can be overcome.

Is Pakistan’s microfinance sector serving women entrepreneurs?

The idea for looking into the issue of microfinance outreach to women in Pakistan had been of interest to the World Bank for some time.  Outreach of the microfinance sector to women borrowers had always been extremely low – hovering between 50 to 60 percent of borrowers.  Compared to the rest of the region, where we see outreach to women in the 90 percent range in India, Bangladesh, and Nepal, it raised the question as to why similar targets could not be achieved in Pakistan.   We reviewed a number of  possible explanations, but none of them seemed satisfactory.  On top of that, Pakistan is probably one of the most progressive microfinance sectors in the World.  The central bank has developed the most enabling regulations possible, Pakistan continues to top the Economist Intelligence Unit  list of the most enabling regulatory environment, innovations in branchless banking and new modes of financial service delivery are being incubated here, and the microfinance network in Pakistan continues to be regarded as world class.  So, given all the positive attributes around the sector, why was it not possible to more effectively reach this important constituency? 

Wanted: Photos Highlighting the Diversity and Dynamism of Microfinance!

Michael Rizzo's picture

On June 6th, CGAP launched its annual and ever-growing photo contest that highlights the diversity and dynamism of microfinance around the world. Each year, the CGAP Photo Contest receives stunning photographs from around the world that help tell the story that CGAP’s work addresses.

Now in its 7th year, CGAP has asked entrants to focus on the broader issues that surround financial inclusion to help show the variety of formal and informal ways in which finance is woven into the fabric of poor people’s day-to-day activities. CGAP is continually trying to build upon the Contest’s success by challenging photographers to use their imaginations to capture microfinance in distinctive ways and diversify the representations of microfinance. In particular, photographers from South Asia that have consistently dominated the top prizes will need to continue wowing the judges for place as a finalist as more and more photographers from Sub-Saharan Africa, Latin America, and the Middle East deliver compelling work.


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