News Column

Innovation in Islamic Microfinance

June 24, 2014



How can microfinance providers innovate to diversify the range of Sharia-compliant products? With an estimated 650 million Muslims living on less than $2 a day, broadening the range of Islamic microfinance products is an important way to bring the poor into the financial mainstream.

Even as more microfinance institutions have entered the Islamic microfinance market, their products have been largely limited to the cost-plus-markup product known as murabaha, which is geared toward asset purchases.

In order to encourage microfinance providers to expand their Sharia-compliant product offerings, CGAP has partnered with the Islamic Development Bank, Al Baraka Banking Group, and Triple Jump to sponsor the Islamic Microfinance Challenge - a global contest to identify innovative Sharia-compliant microfinance products.

The theme of the Islamic Microfinance Challenge was "Beyond Murabaha," and it received entries from microfinance institutions in 11 countries. Pakistan'sWasil Foundation was the winner and judges selected its entry - an innovative product package focused on agricultural finance - for its impact on the lives of its clients, the sustainability of the offering and its potential to scale up in Pakistan and in other predominantly Muslim countries.

The judges also chose the Bank of Khartoum from Sudan and Kompanion Invest from Kyrgyzstan as finalists.

Examples like these three finalists provide a snapshot of the kind of innovation that is needed to ensure that Islamic microfinance products can meet the financial needs of poor Muslim populations.


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Source: AllAfrica


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