Helping the poor

Irrespective of faith and background, we need to address poverty as poverty

Irfan Ahmed Sheikh
Srinagar, Publish Date: May 20 2018 10:14PM | Updated Date: May 20 2018 10:14PM
Helping the poor

Human development is not possible unless poverty is eradicated.  To uplift poor, we need financial support. Among various ways to support needy which are categorised as formal or informal, conventional institutions particularly micro finance institutions are meant to serve poor by way of financing their tiny business at individual level or group level. This way of financing is continuously backed by an extra burden in the shape of interest which borrower has to bear. On the contrary when we talk of spirituality we are basically talking of religion. Spirituality means religion. Here financing plays key role for the same. Although Conventional micro-finance is recognized as hope for the poor with marginal burden in most of cases but not for extremely poor. To finance them is not among purpose of any financial institutions even in conventional micro fiancé institutions, to address those falls in the domain of religion. Islam provides solution for the same. As Islam provides the comprehensive code of life and to deal with poverty reduction is as one of the fundamentals of faith.

Today Islamic micro finance which is in operation. It offers trade based financing as well as charity based financing. Islamic Micro Finance Institutions (IMFIs) have been working in a very limited form that too mostly in Asian countries. As a subset it gives financial support to poor and extremely poor, in the shape of grants or provide Qarz-e-Hasan for promoting trade activities in terms of entrepreneurship development among Muslim as well as non-Muslims. Today, as on date over 300 Islamic micro-finance Institutions operate in world both in Islamic majority and minority nations in more than 32 countries with a market size as estimated over USD 1 billion dollar. Among Islamic micro finance operating countries as per CGAP Indonesia, Bangladesh, Pakistan and Afghanistan are the leading stakeholders of industry. They address about 80% share of current Global Islamic microfinance industry that amounts to over 2 million active financing clients whether poor or extremely poor irrespective of faith.

In order to extent assistance to a greater number of people, new models of Islamic micro-finance are being built and in practice, various model developed by the IDB, Muslim Aid and a nonprofit contemplate reservoir in the United States and in Asia, the Institute of Halal Investing (IHI). In the early days of Islamic micro-finance, the loans/advances were usually given with no cost and any costs deserved were covered with other charities as sadaqa specific and general. Clemency with zakat. While using qarz-e-hasan is relaxed method to ensure Shari'ah compliance, but it is not a sustainable model. Even when repayment rates are between 96% to 99% equivalent to the most successful micro-finance institutions (MFIs). It's seen in many cases the reliance on voluntary Contributions makes the continuing operation of the organizations inexact. As one of the early adopters of micro-finance, Bangladesh was also beginners to introduce Islamic micro-finance. A past study of three Islamic MFIs in Bangladesh that existed for between 10 and 13 years, show poor results. The three MFIs disbursed around $530,000 in financing in 1999 (compared to $376 million spent by the Grameen Bank in the same year) on murabaha in most cases. Another early experiment in Islamic microfinance occurred in Hodeidah in Yemen starting in 1997 that also used similar products starting in 1997. Many establishments recently entering Islamic microfinance syndicate a Shari'ah-based micro-finance program with zakat to extremely poor to be able to use micro-finance. Some micro-finance providers use an individual methodology while others use the group methodology that has been successful in conventional micro-finance like the Grameen Bank.

Literature review and experience reveals that financial institute works for monetary rewards as when we analyze Conventional micro finance, although their main target is poor borrower. But extremely poor is almost excluded. So as per data from various sources and peoples experience it is quite evident there are incredible openings for Asia to develop the Islamic Micro finance industry in order to uplift poor for his growth at ease. Islamic micro finance is able to support many chronic areas to enrich financial inclusion. Asian markets are home to a large Muslim poor population which enables a ready market. Every year for the introduction and Distribution of Shari'a-compliant particularly those having spiritual base, the progress represents more opportunities for the region to benefit from this rapidly growing Sharia compliant industry. It's acclaimed that while talking Islamic micro finance we must segregate products based on spiritual and material grounds in order to benefit targeted poor. Further other faiths needs to be encouraged more and more. To me it’s an eye opener for India particularly Kashmir.

(Irfan Ahmed Sheikh is a Research scholar)




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